Magazines. The 132-year-old Hearst Corporation is arguably the world’s oldest multi-media group as a 19th century newspaper publisher which invested in magazines and movies before Rupert Murdoch was born. It also has a fair claim to be the best. Not because it has consistently been the most successful in any or all of its chosen media sectors, or has been the most profitable. Its success can be measured by long-term profitability across most media, and also an ability to sustain partnerships, joint ventures and strategic alliances. The company founded by the fiery W. Randolph Hearst has become the best media partner of all.
The $11bn-revenue family-owned Hearst (which is believed to generate pre-tax profits of some $1.5bn) was built on the successive fortunes of daily newspapers and magazines. Then, in 1990, it became a 20% shareholder in the Disney-controlled ESPN sports cable network which, alongside other broadcast and cable TV networks, frequently accounted for almost 100% of Hearst profits – just as Cosmopolitan had done in the two previous decades as the world’s most successful magazine. And, now as TV comes off the boil, along comes Hearst’s fast-growing business media.
It began in medical and automotive data and accelerated through aviation and the acquisition of the $1.3bn Fitch, the financial ratings and intelligence group. B2B data now accounts for 40% of the Hearst profit, compared with 14% just five years ago. That’s a big shift from 2006 when the widely-admired Frank Bennack (longtime chairman and architect of the modern Hearst Corporation) presided over the opening of the Norman Foster-designed Hearst Tower in Manhattan by saying it had effectively been paid-for by Helen Gurley Brown, the legendary editor whose revolutionary Cosmopolitan magazine had transformed the company in the 1960s.
That was then. Last year the company fought to rebuild its battered magazine profits by appointing as Hearst Magazines president Troy Young, the digital whizz who had spent five years building the US company’s digital audiences, revenues and profit. Hearst had shown the way, first by separating digital from print and then by bringing it all back together again – but with digital now clearly in charge and creating great content sharing systems. Young’s appointment was a shock to many longtime magazine people who lost comfortable berths in the Hearst Tower. But Hearst Corp CEO Steve Swartz (the former financial journalist who has led its investments in business media) wanted real change: “…we need the readers to pay more for the product. And we need to find a way to make digital subscription products work for magazines in the way that they are starting to work for newspapers.”
Business media is making Hearst an increasingly international business. But the company which pioneered the large-scale licensing of magazines (Cosmopolitan once had almost 70 global editions) still has some 300 magazines outside the US, variously owned, part-owned and licensed. In the UK, its wholly-owned subsidiary claims monthly magazine circulations of almost some 4m and a digital footprint of 20m people through 17 brands including Elle, Good Housekeeping, Esquire, Cosmopolitan, Men’s Health, Women’s Health, Runners World, Real People, Country Living, and Harper’s Bazaar. The legendary magazines with their bright colours and feisty cover lines still look good on the news-stands. But they have been filleted by the dramatic loss of advertising and circulation revenue.
The London-based National Magazine Company (now trading as Hearst UK) was Randolph Hearst’s first international business when he started it back in 1910. It has sometimes been highly profitable but relatively modest margins and erratic growth have never worn-out the loyalties of Hearst family shareholders and executives who enjoy summer-time visits. Frank Bennack frequently chairs the London company board meetings, not Steve Swartz who has taken the reins everywhere else. It is this emotional attachment, as much as the commercial potential, that may now lead to substantial new investment in the UK business that last year moved to the stylish “House of Hearst” office building on Leicester Square. It’s a statement.
CEO James Wildman joined Hearst two years ago after a distinctive career in advertising sales and tech across TV, online and newspapers. The open-faced Wildman has brought renewed energy, flair and confidence to Hearst UK, which has helped to grow its advertising and events. He claims that total revenue in 2018 grew for the first time in six years. But the £100m-revenue Hearst UK remains a crystal-clear picture of the challenges faced by magazine publishers. They must adjust to a media market which is, inevitably, dividing between the mega-audience digital platforms and ‘narrow but deep’ multi-media specialists, with only limited scope for “semi-mass market” magazine publishers in the squeezed middle-ground.
Hearst publishes Good Housekeeping which, with its Good Housekeeping Institute testing and ‘seal of approval’, is a golden business with a potential well beyond a mere magazine and test kitchen. Even now, it may account for more than 50% of the UK company’s profits. But there are also 16 other magazine brands, some of which are unprofitable or marginal but which may help to generate advertising revenue across the portfolio. As if to underline how advertising dependance can continue to distort traditional media despite the need to get back to focusing on readers, most Hearst UK magazines pump out free copies (anything up to 50% of the total circulation of individual brands) to boost their audiences and support advertising sales. It is one of the less smart ways in which Hearst UK differs from its peers. Even Good Housekeeping gives away 16% of its circulation. Nobody needs reminding that such hyping tends not to fool advertisers and helps to depress the long-term copy sales revenue on which most UK magazines depend for their profitability.
Hearst UK has two digital-only brands (the showbiz DigitalSpy and the medical NetDoctor), a growing portfolio of content marketing magazines produced on behalf of blue-chip clients, some imaginative brand licensing deals with hotels and furniture makers, and a widening range of events large and small. It is a hyper-active company that is especially good at advertising sales and (even now) at promoting the sizzle of magazines to ad agencies. But the corporate web site can make you dizzy. It is easy to feel that Hearst UK has too many brands, too diverse a portfolio, and is just too busy trying to do almost everything with its magazines – but too little for the future.
The challenge must be to harness the energy with a robust content-focused strategy, mostly defined by something other than magazine brands and that will – in the long-term – be funded primarily by something other than advertising. It’s the familiar task of developing a new business while maximising the profits from the old one.
Hearst UK may have made a start with the embryonic “Financially Fabulous” digital and events brand which gets content and promotion from some of its major magazines. The project could point towards the company’s potential future as a multi-media content specialist in targeted vertical sectors like Travel, Health, Food and Fashion, in which it has an established reputation, real expertise and content. In such a strategy of vertical communities, it could develop new and existing brands in:
- Digital (and even print) information and entertainment
- Events especially exhibitions
- B2B media
- Market research, intelligence and data
The emphasis of a vertical could be on versatility, deep expertise and diverse revenues, hence the added benefit of B2B information services and events. The need, as ever, is to reduce the dependance on print. But, despite its build-up in digital and events, Hearst UK is still dominated by magazines, magazine people, and the language of magazines. It needs to change.
The development of market research and intelligence services could be good diversification for a company that already develops consumer data in order to sell advertising and sponsorship. It has long seemed logical for consumer magazine publishers like Hearst to get into the research business.
A new Hearst UK “vertical” strategy could drive the acquisition of specialist media companies in each of its targeted sectors. It might start with the £70m Centaur Media, the slimmed-down B2B specialist in marketing, research and intelligence. It could follow with targeted new products and services in each vertical. CEO Wildman should be encouraged by the availability of bolt-on media deals in the UK market and by his parent company’s rock-solid balance sheet and appetite for strategic acquisitions. Frank Bennack’s latest visit to London would have made the point. Go on, James.
This week, the redoubtable Mary Meeker (now the general partner at Bond Capital) delivered her annual US Internet Trends Report (see link below), some key points from which are:
- E-commerce is now 15% of retail sales
- Worldwide gamers grew by 6%
- Internet ad spending grew by 22% in the US, some 62% of digital display is programmatic
- Big growth in telemedicine
- The familiar disparity between the time spent on, and ad dollars billed by, print media continues but the gap is closing
Have a wade through the 33-page slideshow:
News. The Maven, of Seattle in the US, has agreed to acquire TheStreet Inc for a total price of some $34m – some 2% of the financial media company’s peak value. Both are listed companies. The Maven provides a digital distribution platform for a coalition of over 270 media providers. The news and media platform is claimed to reach 100m consumers globally. TheStreet – which was founded by American television personality, former hedge fund manager, and best-selling author Jim Cramer who is the host of CNBC’s Mad Money programme – has developed a strong financial news presence which can now reach a wider audience via The Maven platform. In December, TheStreet sold its B2B business units, The Deal and BoardEx, to London-based Euromoney Institutional Investor Plc for $87.3m.
It will now join other brands such as History, Ski Magazine and Maxim on The Maven and will provide the core of a finance vertical. This marks Maven’s third acquisition in the last year. It acquired HubPages and Say Media in 2018. The Street was launched in 1996 and listed in 1997, at one point reaching a market cap of $1.7bn. But, in more recent years, profitability has been challenging, to say the least. It has been loss-making for much of the last two years. TheStreet is expected to generate $50m revenue for The Maven over the next 12 months.
B2C. Multiestetica, an online beauty surgery portal covering Europe and South America which was founded in 2007, has acquired Estheticon, a Czech Republic online community offering patients information regarding suppliers of aesthetic medicine.
Events. One-Zero, an Irish sports business conference, is merging with The Fan Engagement Conference which is also based in Ireland. The Fan Engagement Conference was established in 2016 and takes place in Dublin, bringing together digital and fan engagement executives in athletics. The combined company will also merge with the Irish Sponsorship Summit, which takes place in Dublin in September 2019.
Sound + Vision. Tegna Inc, of the US, has agreed with Dispatch Broadcasting Group to acquire local TV stations WTHR (NBC affiliate in Indianapolis, IN) and WBNS (CBS affiliate in Columbus, OH) along with sports radio station WBNS (Central Ohio). The consideration will be $535m in cash, representing almost 8x EBITDA. The purchase deepens Tegna’s reach in local TV and radio markets, and the company expects the acquisition to be earnings positive after one year. The deal follows previous Tegna purchases this year, of 11 stations from Nexstar-Tribune in March for $740m and Justice Network and Quest from Cooper Media in May for $77m.
Events. Messe Frankfurt, the German venue owner and international exhibition organiser, has acquired a stake in nmedia GmbH which provides Electronic Data Interchange (EDI) services. The acquisition is in pursuit of Messe Frankfurt’s strategy to provide a “Nextrade” B2B digital marketplace with standardised ordering and data services for retailers and their suppliers. It says that Nextrade “eliminates the need to order manually from the individual suppliers – for example on site during trade fairs – thus saving time and money. Orders can be placed day or night, 365 days a year, regardless of whether retailers have their own merchandise management system. This is an area where we can see a need for action as well as definite leverage for future success. Like our trade fairs, this tool will create a perfect match between supply and demand.” Meanwhile, Messe Frankfurt, which currently hosts and/or organises 500 events, is launching an international textile fair in Egypt, date yet to be disclosed.
Sound + Vision. US company Sinclair Telecable is to acquire the remaining 50.1% stake in Emmis Austin Radio Broadcasting from Emmis Communications Corporation, giving it 100% of the equity, for a consideration of $39.3m. The company owns six Austin radio stations and will add to family-owned Sinclair’s stable of six radio stations in Virginia, California and Texas.
Sound + Vision. Mediaset, the Italian broadcaster, is to create a Netherlands-based holding company to become the parent of its Italian and Spanish TV interests. The new company, MediaForEurope, will be listed in Italy and Spain. The aim is for the Berlusconi controlled company to develop pan European interests able to compete with Netflix, Amazon and Disney. It follows Mediaset’s recent acquisition of a stake in German TV company ProSiebenSat.
Books. Penguin Random House (PRH) has acquired the book publishing assets of bankrupt publisher F+W Media for $5.6m. F+W filed for bankruptcy in March; book sales accounted for $22m in 2018 and the company also had a communities/magazines division, the assets of which are being sold separately. F+W Books publishes 120 new titles annually and holds a backlist of more than 2,000 titles.
F+W Media has been a prominent specialist magazine and book publisher since the 1913 launch of Farm Quarterly and Writer’s Digest (hence F+W). Its “passion” categories included fine art, crafts, writing, collectibles, genealogy, gardening, woodworking, and astronomy. In addition to magazines and books, it operated digital services, podcasts, online education, exhibitions – and e-commerce. Its major brands include: Coins magazine, Military Vehicles, Interweave, Quilting Company, Artists Network, Writer’s Digest, Antique Trader, Gun Digest and Popular Woodworking. It all came crashing down in March as F+W filed for bankruptcy with net debt of at least $105m and a mere $2.5m in available cash.
It is just three years since a debt-for-equity swap had cleaned out the company’s former private equity owners and provided what was supposed to be a lifesaving $15m. But it was too little too late and the 2018 filing for bankruptcy brought to an end the intervening years of asset sales, outsourcing, and 40% redundancies. It had been scrambling to stay afloat. Early explanations were that the company had struggled to compete against cheap (or free) online content but the real problem was a poorly executed e-commerce strategy.
As the company began online sales of art, craft and writing supplies, it invested heavily in merchandise, the warehousing to store it, and the tech to manage the whole process. The company now admits: “Unfortunately, these additional obligations came at tremendous cost, both in monetary loss and the deterioration of customer relationships”. The damage was clear: F+W lost no fewer than 36% of its subscribers during 2015-18, while advertising revenue fell by 30%. It said that the seemingly-expensive technology it purchased for e-commerce operations was either unnecessary or flawed, resulting in customer service issues that caused significant reputation damage. Far from saving the company, e-commerce was the only revenue stream that consistently failed to produce profits: last year, for example, $3m in craft revenues had a $6m cost of sales.
It’s a long way from 2014 when CEO David Nussbaum (now CEO of the high-flying America’s Test Kitchen TV shows) announced that F+W was “strategically moving away from our traditional roots in the media business to focus on its fastest-growing businesses, digital and e-commerce.” F+W was full of optimism and was said to have grown its e-commerce business from one “store” with $6m revenue to 31 “stores” with almost $60m. Nussbaum credited the apparent success to “hiring the right people.” But it is now clear that F+W under-estimated the cost and complexity of its e-commerce.
Greg Osberg, the former president of CNET and Newsweek, who became CEO in 2017, told the bankruptcy court that F+W got almost everything wrong: “The company’s decision to focus on e-commerce and de-emphasise print and digital publishing accelerated the decline of the company’s existing business, and the resources spent on technology hurt the company’s viability because the technology was flawed and customers often had issues with the websites.”
Magazines. Exactly three years ago, Time Out magazine promoted its £145m IPO by telling would-be investors that the UK’s star fund manager Neil Woodford would be buying shares. It was a prize endorsement from the celebrated stock-picker whose £32m investment ultimately accounted for 35% of the £90m raised by the IPO. But the price was at the lower end of the target range, and the shares have been under water almost ever since. In three years, Woodford’s investment has lost 40% of its value and Time Out Group’s market cap has fallen to £120m.
That’s a sideshow for Neil Woodford, whose stellar reputation from 25 years at Invesco Perpetual has recently been trashed by the dismal returns of his own five-year-old company. This week, he has even refused to let panicked investors withdraw their funds.
Time Out hardly figures in a Woodford Investment Management (WIM) portfolio once worth £17bn. But Woodford remains Time Out’s second largest shareholder (with 16%), behind the 57% held by Oakley Capital private equity, owned by Time Out chairman Peter Dubens. It gets better. Neil Woodford joined Oakley in 2014 and digital entrepreneur Dubens funded the ‘infrastructure’ for the fledgling WIM which, in turn, became a 19.8% shareholder in … Oakley Capital. This neat little funding circle, inevitably, shades the publisher’s ambitious diversification plans – just as it hopes to attract new investors.
Time Out was launched in 1968 by drop-out student Tony Elliott. Its distinctive entertainment listings, attitude and passion for London life inspired residents and visitors, and became an almost global phenomenon, the cult of Time Out. The magazine and its books scaled the heights of media success for almost four decades – before becoming a victim of all things digital.
It is now five years since Time Out (then largely owned by Oakley Capital) found an unlikely new direction by turning a historic Lisbon market into a branded food hall which brought together “the best of the city under one roof: its best restaurants, bars and cultural experiences”. By 2018, 3.9m visitors were coming to the Time Out Market, arguably Portugal’s largest tourist attraction. After false starts with events and e-commerce, it became the break-out strategy.
Lisbon was followed last month by markets in Miami and New York, with 2019 openings planned for Boston, Chicago and Montreal and 2020 in Dubai, London (2021) and Prague (2022). Of the eight Time Out Markets operating in six countries by 2022, six will be owned and operated by Time Out, while those in Montreal and Prague will be managed on behalf of independent owners. It’s an ambitious strategy for Time Out which is finally swinging away from the heritage of magazine and books which “curate the best of 315 cities in 58 countries” with a claimed audience of 21m in digital and 7m in print. Not a moment too soon.
In 2018, Time Out grew revenue by 10% to £44.8m, 20% (£9m) from the Lisbon market. Operating loss was almost halved to £11.5m. Media and publishing revenues fell 3%. In the UK, magazine revenues rose 2% but events revenue was 40% behind and nobody talks much anymore about e-commerce, which was also down.
Despite claims about digital advertising (+12%) and the brand’s global all-channel audience of 144m people, Time Out’s future is all about restaurants and retail. The four US markets are forecast to generate £12m revenue this year, and £9m EBITDA from £43m revenue in 2020 – when the group expects to be profitable. As CEO Julio Bruno says: “2019 will be a transformative year … Time Out will have markets totalling 185,000 sq ft with almost 4,000 seats and offering food from 120 of the best chefs in these cities.” A very big plunge.
Everything now depends on the markets and Time Out’s ability to recruit the “best” restaurants in each city and to come up with small, reasonably-priced menus they can cook and serve on-site. The restaurants sign contracts for a minimum of one year, with Time Out taking a 30% share of revenues, while it also pays most of the restaurant costs including equipment and marketing.
Time Out makes a big play out of how its media and markets teams collaborate: in addition to identifying which restaurant owners should be in the market, magazine editors also determine which should keep their place, and they keep an eye on the food and performance. A nice theory.
At the very least, it’s difficult to see how the company will be able to sustain its loss-making, £40m-revenue publishing operation (40% still in print) at anything like current levels, let alone give editors the right to veto commercial policy. Once the markets have become established, will publishing really fit? Will it be divested or licensed out? The growing competition for the Time Out markets will require focus and, presumably, more investment.
Almost two years before Time Out launches its first “home” market at London’s Waterloo station, a “communal eating” rival – Market Hall – is operating in Victoria and Fulham, with a major West End opening this summer. Good ideas tend to get copied.
Julio Bruno says “Time Out Market does not exist without the Time Out brand.” Of course. But he probably doesn’t mean all those magazines and books. After all, his investors may now get a lot more demanding.
Events. Leafbuyer Technologies Inc, the five-year-old, Colorado-based digital information service and marketplace for cannabis users, has agreed to purchase the Las Vegas exhibition CBD.io. <CBD is the common name for Cannabidiol, a non-psychoactive cannabinoid found in cannabis which, research shows, may help to relieve joint pain and anxiety. >The deal also includes an e-commerce wholesale and retail site. Last year’s event featured more than 270 exhibitors including Costco, Walmart and GNC. It attracted an estimated 12,000 people across two days which were filmed for a Netflix documentary series. The show also includes VapExpo, a collaboration with the eponymous French show on vaping which recently held its 10th event in Paris.
CBD.io CEO Robb Hackett says: “In 2018, CBD.io hosted one of the largest and most successful hemp and CBD industry expos in the United States. We’re expanding this year to focus on more speakers and educational series, host nearly double the booths, and bring more value to our trade show clients. CBD is a hot commodity in the US, as well as other countries around the world. With Leafbuyer, we have our sights set on locations for trade show expansion in both Europe and Asia in 2020.”
The next event will be held at the Las Vegas Convention Center, Nov 22-23, 2019. The Nevada city is the location of the world’s largest cannabis dispensary. In 2017, the first full-year of legalisation, Nevada recorded retail sales of $425m of recreational marijuana and tax receipts of $70m.
The recreational use of cannabis is legal in 11 of the 50 states in America, including: California, Nevada, Washington, Massachusets, Illinois, Michigan and Vermont. It is legal for prescribed medicinal use in most other states. Marijuana Business Facebook estimates the legal-marijuana industry’s economic impact in the US was between $20-23bn in 2017 and could be $77bn by 2022. Market researcher New Frontier Data estimates that the US cannabis industry directly employs at least 250,000 people, almost equal to the number of employees at US iron and steel mills.
The seven-year-old, listed company Leafbuyer claims to be one of the most comprehensive online sources for cannabis deals and information, reported to reach millions of consumers every month. It self-describes as “the official cannabis deals platform” of Dope Media, Sensi Magazine, and Voice Media Group. The company claims that legal cannabis sales in the US (most for medicinal purposes) have increased revenue from $4.6bn in 2014 to $12bn in 2018 and are expected to reach $17.4bn this year. In the nine months ended March 31, 2019, Leafbuyer made an operating loss of $4.5m (2018: £1.3m) on revenues of $1.3m ($0.8m).
B2C. Axel Springer has more than doubled its stake in the UK’s largest online real estate agent Purplebricks, from 12.4% to 26.6% of the equity, representing an additional investment of €49m. It is buying the shares of former CEO and founder Michael Bruce and his family. Bruce is now no longer a shareholder in the company he launched seven years ago. The share purchase underlines the German publisher’s support for Purplebricks’ distinctive fixed-price online model. One further major shareholder, fund manager Neil Woodford (see Time Out story this week), owns almost 24%. It is widely believed that Springer will soon acquire his stake and, consequently, mount a bid for the whole company.
Axel Springer initially invested in Purplebricks in March 2018 to boost expansion beyond the UK. But that growth has recently been scaled back as the company struggles with falling UK revenues. Shares are currently trading at well below their 2017 peak which once valued the company at £1.4bn. They plunged 40% in February after the company slashed its revenue forecasts, blaming low growth in its fledgling US business and “headwinds” in Australia. It will now concentrate on the UK and Canadian markets and is expected to make revenues of some £145m this year compared with £94m in 2018 and £185m as originally forecast. In 2018, the company made an operating loss of £19.6m.
Purplebricks has tried to do too much too soon with, and the coolly strategic Axel Springer may be the best antidote.
Magazines. Two successors of the founding Pietsch family have acquired Gruner and Jahr’s 60% stake in MotorPresse, of Stuttgart. Subject to regulatory approval, Patricia Scholten and Peter-Paul Pietsch have bought-back the shares in the company founded by their family in 1946 but which were sold to G+J (part of Bertlesmann) in 2005. The company publishes over 120 international motoring and lifestyle brands including Motorrad, Motor Sport Aktuell, and also Men’s Health, Women’s Health and Runner’s World under licence from Hearst, in the US. In 2017, Motor Presse had revenues of €193m. The Hamburg-based G+J publishes mass market brands including Stern, Geo and Brigitte.
B2B information. Tech private equity firm SureSwift Capital Inc has acquired TECHdotMN, an independent online publisher of local Minnesota tech news. The online only company was founded in 2009. Terms were not disclosed.
News. The privately-owned, 123-year-old Paxton Media Group, of Paducah, Kentucky, has acquired four local newspapers based in Arkansas to add to its stable of 32 newspapers (total circulation: 350k) and a TV station which predominantly cover the southern US. The newly-acquired titles include daily The Log Cabin Democrat along with three local weekly titles.
News. Canadian news publisher Steven Malkowich has bought the Bakersfield Californian newspaper, previously family-owned for 122 years through the new company Sound News Media. He already owns California news titles Antelope Valley Press and Lodi News-Sentinel, in addition to being EVP of Alberta Newspaper Group. The Los Angeles Times reports:
“The Vancouver-based Alberta Newspaper Group, where Malkowich is employed as an executive vice president, is run by David Radler, the man who helped fallen media baron Conrad Black build a global newspaper empire. Radler was Black’s longtime right-hand man, and later — in exchange for a plea bargain in their fraud case — served as the star witness against Black. Radler, who was formerly the publisher of the Chicago Sun-Times, served less than a year of his 29-month sentence for fraud. Black was recently pardoned by President Trump. In 2007, Canada’s Financial Post wrote, amid the criminal proceedings, that Radler was ‘quietly amassing a burgeoning community newspaper empire with his eldest daughter’ Melanie Walsh (née Radler). The article details the early holdings of the Rhode Island newspaper group, which have since grown.”
B2B. It is 50 years since the ground-breaking Euromoney magazine was launched by the UK’s Daily Mail Group whose finance editor Patrick Sergeant had predicted the expansion of international banking as a result of the UK’s relaxed foreign exchange regulations. Euromoney championed the boom and became the leading magazine of the financial wholesale markets.
The £6,200 of capital invested in the monthly magazine (£6k from the Daily Mail and £200 from Sergeant himself) created what has become a £1.4bn UK listed B2B information business, self-described as a provider of “critical data, price reporting, insight, analysis and must-attend events to financial services, commodities, telecoms and legal markets.” Its key brands include: Euromoney, Institutional Investor, BCA Research, Ned Davis Research, Metal Bulletin, American Metal Market, Insurance Insider, and IJ Global, and the recently-acquired BoardEx and The Deal.
Its growth helped also to propel the transformation of Daily Mail & General Trust (DMGT) into a vibrant all-media group which has been able to support the systemic decline of its news brands with the proceeds of successful startups, none more so than Euromoney.
Euromoney Institutional Investor Plc (“Euromoney”) built a formidable reputation in B2B media through its ability to crank out long-term profit growth from diversification into conferences, tight cost control, and highly-successful M&A. It was also very good at selling high-priced advertorials in its prestige publications – decades before “content marketing” was everywhere. The company (a DMGT subsidiary, even as a listed company for the past 30 years) also became known for super-generous senior executive remuneration, which irked powerless minority investors.
This year, it has all changed. DMGT has sold-off its majority stake and Euromoney is an independent company for the first time.
That may be a mixed blessing for CEO Andrew Rashbass (ex Reuters and The Economist). He does not have the pay deal that gave one of his predecessors annual remuneration of millions of pounds as a result of a “secret” bonus scheme paying him 6% of profits. But Rashbass is enjoying his new-found independence. Even after recent half-year results showed revenue decline in the investment research businesses that had long powered the company’s global growth, he regaled investors with his “B2B Information 3.0” strategy which commits the company to vital workflow tools for clients – as opposed to “flat” magazine-like services in print and digital.
The strategy features continuing investment in Price Reporting Agencies (PRAs) first acquired with Metal Bulletin all of 13 years ago and augmented through more recent deals to cover metals, mining and forest products. During the first half of its financial year, Euromoney’s “pricing, data & market intelligence” division increased revenue by 3% to £89.7m (more than 50% of the company total). Profits also increased by 3% to £32.7m (50%). But it’s a lot more patchy than it seems and “market intelligence” includes some mixed information services and events. Further, some 50% of all Euromoney revenue came from events, more than half of which were in this “pricing” division – but which themselves were 4% down on the corresponding period of 2018.
Investors are sometimes comforted by the very word “events” because it seems to connect with the soaring fortunes (and values) of trade exhibitions. But many of Euromoney’s events are conferences which can be highly cyclical, with relatively low competitive barriers. Even trade shows can be over-sold. A clue to how a perfectly good company can feel compelled to squeeze its results into a visionary strategy is gained from Euromoney’s description of its ITW (formerly International Telecoms Week) as a “3.0” event which fits into telco workflows. Really, it’s a (very strong) global trade show but not part of the market pricing services which Euromoney is targeting and which may eventually make even super-profitable events non-strategic – and subject to competition from exhibition specialists. It’s a reminder that the transformation still has a way to go. Interestingly, the “banking & finance” division (which includes the Euromoney brand itself) accounted for only 5% of profits in the first-half results.
But an M&A step-up may be on the way. PRAs are attractive because they are the “official” prices which govern trading in the world’s commodity markets. They are the exclusive information sources which facilitate transactions, consulting and high-value research. In many ways, Metal Bulletin (acquired by Euromoney for £200m in 2006) was a PRA pioneer. The operation (now known as FastMarkets MB) began life in 1913 as a spin-off from The Ironmonger magazine, to service the global markets using the London Metal Exchange (LME) for price discovery and risk management. Fast forward a century and the £200m-revenue Argus Media owns many of the pricing indices across energy, metals, petrochemicals and coal. It’s the second largest of the PRAs after energy specialist Platts (part of McGraw Hill). Three years ago, General Atlantic private equity paid £1bn for a 50% share in Argus. It, reportedly, now wants to sell half its stake. Is it too big a deal for Euromoney in 2019?
Rashbass may, instead, go for the privately-owned CRU Group (formerly Commodities Research Unit) which is also celebrating its 50th anniversary. The £35m-revenue London-based company has PRAs across mining, metals and fertilisers. Its 280 employees include analysts and price assessors in London, Pittsburgh, Santiago, Delhi, Mumbai, Shanghai, Beijing and Sydney. It is believed Euromoney and CRU have had abortive “collaboration” discussions in the past. They would be a good fit. Perhaps the trigger now could be the fact that, having both tendered for an LME aluminium price contract, they were awarded it jointly. Euromoney and CRU are working together for the first time, so who knows what’s next?
Then, there is the private equity-owned, £30m-revenue AgriBriefing which has shifted from UK farming news, information and events to acquire agriculture PRAs in France and the US. But it recently failed to buy Informa’s coveted AgriBusiness Intelligence (acquired, instead, by IHS Markit which also knows a thing or two about PRAs). AgriBriefing’s proposed deal would have involved a new private equity owner which may not have wanted to retain the UK company’s lower-value publishing and events alongside its data growth business. So, it may be open to a sell-off.
Euromoney (with no current borrowings) could probably acquire both CRU and AgriBriefing for some £250m. The acquisitions could be transformative, and a precursor to selling-off some of the brands which once defined this remarkable company. Just watch.
Magazines. TI Media (the former Time Inc UK) is believed to be selling its 50% share of the UK edition of Marie Claire. The monthly magazine, which is jointly owned by the France-based Marie Claire Album, is believed to be loss-making. In 2017, European Magazines Ltd (publisher of Marie Claire in the UK) had £9.2m revenue (down 15% on 2016), with an operating loss of £300k, compared with £200k profit the previous year. The magazine’s revenue had fallen 26% in just two years and 40% since 2010. Its ABC audit shows that 35% of the 120k circulation in July-December 2018 comprised free copies. Marie Claire UK’s total circulation has fallen by 47% in the past five years.
Founded by Jean Prouvost (who also launched Paris Soir and Paris Match), Marie Claire was a weekly in 1937-9, when newsstand sales reached almost 1m copies. It was a magazine ahead of its time, combining fashion and beauty with serious and provocative journalism. It was revived as a monthly in October 1954 and, in the 1990s, claimed 29 international editions and an audience of more than 12m. Today, it is published in the US, Australia, Argentina, France as well as the UK.
The identity of the buyer of the UK edition is not known. But it is thought not to be Hearst (whose parent company publishes Marie Claire in the US). It is possible that the magazine is being acquired by Bauer which could merge or manage it with the UK edition of Grazia. The price is likely to be nominal.
TI Media, which last week confirmed the sale of music brands NME and Uncut to BandLab, of Singapore, is thought likely to conclude the sale of other magazines as it seeks to re-focus its broad portfolio on fewer markets, especially those with digital and events growth prospects.
News. German media group Axel Springer may revert to private ownership under a potential KKR deal to buy the shares of Axel Springer shareholders (other than majority owner Friede Springer and CEO Mathias Döpfner) and take the company into private ownership. Döpfner and Springer will not be selling their shares. The current share price values the news publisher at around €6bn and the declared aim is to enhance the long-term value of the business, potentially by facilitating acquisitions more easily beyond the scrutiny of public ownership.
Axel Springer is arguably one of the world’s most successful traditional media groups, having diversified strongly from German-only print to global digital in under 15 years. It is the owner of media brands including Bild, Germany’s top-selling daily, Die Welt, and digital services including Business Insider, UpDay and Politico Europe. However, most of the company’s profit now comes from online classified advertising. Total revenues rose 4% to €3.2bn in 2018.
Springer’s impending ‘go private’ deal has been announced just a few months after Schibsted, one of its leading competitors, de-merged its online classifieds company MPI, prompting us to ask: “Which company will want to merge with the $650m-revenue MPI? Perhaps the most tempting scenario involves Springer, arguably the world’s best news-based digital group. The Berlin-based company (50% international and 70% digital) must once have flirted with the idea of a Schibsted like de-merger when it had a classifieds joint venture with US investor General Atlantic during 2012-16. A combined MPI-Springer classifieds group could become an unrivalled global leader. While Springer’s fast-growing classifieds are concentrated heavily in Germany, UK, Belgium, France and Israel (and, therefore, have relatively little overlap with MPI) and account for “only” 38% of group revenues, they account for more than 60% of its EBITDA – and most of the growth of the €6bn company.”
You can (sort of) imagine what KKR may be planning.
Magazines. Meredith Corp, of the US, has sold the intellectual property of Sports Illustrated to Authentic Brands for $110m, lower than the $150-200m it had reportedly been looking for after seeking a buyer for almost a year since it was acquired as part of Time Inc. Authentic Brands is a brand licensing company; it will take over marketing, development and licensing of the title with Meredith continuing to operate the print magazine and the website. Authentic Brands has a portfolio including the rights to Marilyn Monroe, Elvis Presley and Muhammed Ali. The acquisition includes the magazine’s archive of more than 2m images, and its Swimsuit issue and Sportsperson of the Year brands.
The two companies aim to build a platform around the brand across all media. Meredith will pay a licence fee to continue its editorial operations; Authentic Brands expects to leverage the brand through events, gambling and gaming. It looks like a deal which Meredith has had to stretch to get over the line. Authentic Brands was founded in 2010 by CEO Jamie Salter with $250m of backing from private equity and individuals including George Soros. Given Meredith’s long-term success in brand licensing (not least through its Better Homes & Gardens magazine), it is assumed that these activities will figure in the development plan for Sports Illustrated which has been struggling, like many other print magazines, to compete with (or monetise) the web.
The Sports Illustrated sale completes Meredith divestment of the unwanted Time Inc assets which included Time magazine (sold to Marc Benioff, CEO-founder of Salesforce) and Fortune (sold to Chatchaval Jiaravanon, of Thailand), while Money has been closed. Total proceeds of the three deals are $450m which is thought to be some $150m less than the company had expected when it paid a total of $2.8m (including debt) for Time Inc in 2017. The Des Moines, Iowa-based company is also believed to have over-estimated the net proceeds from the sale of Time Inc UK (now TI Media) which were, ultimately, less than 50% of revenue.
The disappointing sale proceeds (underlined by the slightly tricky Sports Illustrated deal) will prompt Meredith investors to scrutinise closely its progress with the retained Time Inc assets, not least People, which remains America’s most profitable magazine. For all the talk of People’s collaboration with Allrecipes, justifying the $2.2bn spend on Time Inc (net of disposals in the US and UK) may now be much more challenging than expected, even for the famously low-cost publisher.
Meredith’s commitment to deliver at least $550m of cost savings by 2020 is just the start. As Reed Phillips, chief executive of media investment bank Oaklins DeSilva+Phillips, told the Wall Street Journal: “When they bought Time Inc, it was a very big bet that they could transform the business. The jury is still out. They probably have two to three years to prove that they have a strategy that makes the business much less dependent on print.”
News. Seven West Media, the Australian publishing and TV company controlled by Kerry Stokes, has bought the remaining 50.1% of Community News Group from its majority shareholder News Corp Australia. Community News covers Western Australia including Perth through 12 suburban newspapers and 17 digital properties. Seven West owns Australia’s Channel 7 TV, Pacific Magazines, and The West Australian.
B2B information. Netherlands-based Academy to Innovate HR (AIHR), a provider of online education to HR professionals, has acquired the blog Digital HR Tech which claims 650k monthly uniques. The blog will continue as AIHR Digital and will complement the parent AIHR Academy and blog. AIHR aims to enable online training for HR professionals as an alternative to traditional classroom teaching. It attracted over 1m web visitors in 2018.
Sound+Vision. French company Canal+, owned by Vivendi, has bought pay TV company M7 from its owner, the private equity group Astorg Partners in a deal valued at over €1bn. M7 operates in Benelux and central Europe with a turnover of €4m. Canal+ is aiming to withstand the threat of Netflix which now has 5m French subscribers.The deal has added 3m to subscriber base to take Canal+’s total subscribers to 20m – almost doubled in five years. M7 does not produce content of its own but transmits Disney Channel, HBO, Eurosport, National Geographic and Nickelodeon. Vivendi remains keen to expand into southern Europe despite its (so far) failed co-operation with Mediaset.
Sound + Vision. Italian broadcaster Mediaset has bought a “friendly” 10% stake in German TV company ProSiebenSat1. Mediaset is controlled by Silvio Berlusconi and is one of many TV companies trying to counteract the threat of Netflix. The two companies are already members of 12-member group the European Media Alliance with an audience over 200m. Vivendi, the French media company, holds a 30% stake in Mediaset but this stake has been frozen by Italian authorities while it considers media concentration.
Sound+Vision. French TV group M6 is to acquire the TV interests of fellow French company Lagardère, excluding its music and ballet channel, Mezzo for €215m, subject to regulatory approval. The TV turnover of Lagardère was €98m in 17 with EBITDA of €20.6m. It operates family and children’s brands including Gulli and its reach extends internationally into 90 countries. Lagardère is to sell Mezzo separately and intends to focus on its publishing and travel retail businesses.
Events. Charterhouse private equity (until last year the majority owner of French exhibitions group Comexposium) has made an agreed bid of £668m (including the assumption of debt) to take the UK quoted Tarsus Group private. The price is said to be 17 x EBITDA of the last two years, although one analyst (suggesting the possibility of a counter bid) pointed out that it might be “just” 12.25 x EBITDA forecast for 2019. Tarsus Group, which is registered in Ireland, operates more than 150 exhibitions in the US, South America, China, South East Asia, the Middle East, and Europe, in sectors including aviation, medical, labels and packaging, travel, housewares and automotive. Its flagship brands including Labelexpo, Connect and the Dubai Airshow. It also owns the US-based Trade Show News Network (TSNN), claimed to be the most widely-used events database with some 130k registered web users.
The company was founded 21 years ago by its chairman Neville Buch, a former investment banker and boss of Blenheim Exhibitions (acquired by UBM for £600m in 1996) from which many members of the Tarsus senior team came. The highly-rated Doug Emslie will continue as CEO under private equity ownership. The deal can be expected to increase the pressure for the £36bn RELX data-tech group to sell its highly profitable, £1.1bn-revenue Reed Exhibitions division which operates 500 events worldwide and was the global market leader until Informa acquired UBM last year. At the Tarsus bid-level, Reed could be worth £4-5bn.
Announcement of the Tarsus buy-out today pushed up the shares of exhibitions group ITE by 5%, valuing the company at £575m. One analyst speculated that the Blackstone-owned Clarion Events might now bid for Tarsus, although most insiders expect the next big exhibitions deal to be the sale of the privately-owned, Belgium-based EasyFairs, perhaps later in 2019. The whole clutch of UK and US private equity firms who have been rotating through trade shows this past few years are all waiting for the sign that Reed Exhibitions is on the way.
All media. As sales of iphones, ipads and macbooks slow, Apple is is rapidly moving into the content business. Its video streaming challenger to Netflix is coming soon. But first comes Apple News+, the revamped Apple News which incorporates Texture (“the Netflix of magazines”) which was acquired last year from publishers Condé Nast, Rogers Media, Meredith, and Hearst. Apple News+ was launched in the US last month, priced at a $9.99 per month, and is an ‘all-you-can-eat’ magazine and newspaper subscription service which includes content from The Wall Street Journal, Los Angeles Times, the Toronto Star and 300 magazines, either tied-in by the Texture sale or attracted by the prospect of immediate distribution to 1.4bn devices. But it means publishers giving up the direct connection to their readers. They don’t get data because Apple doesn’t track users, which means advertisers can’t target them. But many reckon it is still a powerful way of attracting new audiences to media brands in search of growth.
One person who’s unimpressed by Apple News+ is Alex Kroogman, founder and CEO of the 10-year-old, Canada-based PressReader Inc, who also describes his company as “the Netflix for news”. Everybody does it. The reading platform offers unlimited access to full versions of more than 7,000 newspapers and magazines throughout the world.
The company is keen to emphasise its commitment not just to magazines (in which there is a growing number of competitors in Europe and the US) but also to newspapers where, until Apple+, there have been fewer alternatives. PressReader grew out of Kroogman’s former NewspapersDirect which re-printed the world’s dailies for foreign travellers in hotels and on cruise ships: “I was on vacation in Malaysia. I was sitting in a pool and wondering about home. I was thinking about Vancouver. What were the election results? What was happening? It was 1998 and the internet wasn’t exactly readily available. That’s when I knew I wanted to connect people to the stories they care about, no matter where they are. It sounds simple now, but in 1998 it was unheard of.”
The steady success of PressReader is based on replicating, in digital format, the traditional experience of print. It claims some 12m monthly users either pay for single issues, or $29.95 for a monthly all-you-can-eat subscription, or are gifted access by sponsoring airlines, hotels, public libraries and corporations. Skift says: “For airlines, cruise companies, and hotels alike, choosing what content to share and how to make it available becomes another branding opportunity.” The model is simple: like magazine-centric services Magzster, Readly, Zinio, and also Apple+, PressReader pays publishers every time someone reads their content.
Its proprietary technology extracts text and images from the print editions so that readers (using apps available for iOS, Android, Amazon and others) can browse online content or download whole editions on tablets or smartphones and instantly translate in up to 18 languages. Readers can have the content read aloud, share it, and search across millions of articles — all the things that PDF editions, for example, won’t let them do. But all that PressReader needs from its publishers is the same PDF they send to their printers. The aggregator does the rest.
There is something else that publishers have come to like: “We pay them as though someone actually purchased that issue. The bonus is, publishers then get to count their PressReader consumption toward their audited circulation in the majority of countries around the world. For many of them, this is important. It helps them sell print advertising at better prices — because our digital editions include everything you see in print, ads and all.”
The company, which employs more than 500 people, principally in Canada but also in Ireland and the Philippines, had revenue of $28.4m and made a 10% pre-tax profit margin in 2017-18. Despite the quaint branding, PressReader claims more than 20% of the direct, paying subscribers to its app are under 35.
This month, it signed with Hearst, in the US, to give access to 23 leading magazines including Cosmopolitan, Elle, Esquire, Good Housekeeping, and Harper’s Bazaar. It already has deals with many other major publishers including Meredith, Singapore Press Holdings, Bauer, Mondadori, Burda, TI Media, Dennis, Washington Post, News Corp, The Guardian, Telegraph Media Group, and Condé Nast.
You might not have heard much about PressReader which Kroogman puts down to not having raised (or spent) millions for marketing. But, before you can ask the obvious question about the impact of Apple doing just that, he says: “There are a few different news aggregating products on the market, but PressReader is different. We’re the closest thing to a “Netflix for news”, being the only platform in the world that brings together both newspapers and magazines on a global level.” Until Apple News+ really gets going. Perhaps.
The PressReader tech is impressive and the lack of large-scale marketing may be only part of the reason it is not better known. The company is guarded about its revenues (even though these can be found in public filings) and about its shareholders and financial backing. It is anyone’s guess whether the vagueness has anything to do with the fact that at least one of the PressReader investor-directors is a citizen of Russia, the birthplace also of Alex Kroogman.
It remains to be seen whether Apple+ will eventually upset the cosy world of PressReader which has been profitable for five years. But the key strategic issues may be: whether such services will eat traditional media rather than feeding it; and whether the existing services themselves will be vulnerable to more focused competition.
Some publishers are convinced that PressReader et al can help to generate ‘new’ revenues from ‘new’ readers, while others are content to take the profit regardless. The Canadian company’s emphasis on business and travel audiences has been reassuring for media partners but Apple worries them more. If Apple+ takes off, will it erode media branding by, for example, mixing up the content (even more than currently)? And might the tech giant eventually produce some own-brand content, effectively to compete with traditional providers? The questions highlight the all too familiar challenge of a platform that can become more powerful than the media it initially befriends.
Perhaps more significant, though, is the actual potential of all-you-can-eat reading. The market is still relatively small, evidenced by PressReader’s painstakingly built $28m of worldwide revenue and a growth rate last year of just 7%. Even if Apple does much better, how many readers will really be loyal to a service whose pricing and presentation must reflect the inclusion of thousands of publications they will never look at? The comparisons with Netflix do not stand up. One is a global TV channel packed with original content calculated to appeal to its target audience (with cookies to guide it); the others are large collections of disparate publications together trying to appeal to, well, almost anyone.
So, while PressReader provides unrivalled reading choice, online users may never want to access many more magazine and news brands than they would have contemplated buying as print from news-stands. That realisation might just prompt some publishers to think creatively about how to manage – and monetise – their own digital audiences. Specialist publishers, whose magazine-centric brands are already among the most internationally-marketable media, may consider targeting enthusiasts with focused groups of the world’s magazines in sectors like sports, hobbies, motoring, science, tech, food, and crafts. The same could go for single-sector B2B media and, perhaps, even for the world’s leading daily newspapers. Publishers, which have long been prepared to share retail distribution and marketing with their direct competitors, should consider doing the same in the digital space. Perhaps there’s even scope for such specialist media services to work with PressReader as a tech partner.
Ten years ago this week, Rupert Murdoch said: “The current days of the internet will soon be over.” He was referring to the disastrous knee-jerk strategies of so many daily newspapers (including his own) which made their content freely available on the emerging worldwide web. In their panic not to be left behind by booming digital audiences, daily papers had wrecked the business model and the news business would never be the same again. Traditional media might just be approaching another of those pivotal moments. Think carefully.
Events. Australia’s Nine Entertainment Company (NEC) is selling many of the events acquired as part of its A$4bn Fairfax Media deal last year. The Ironman Group, of China, is paying A$31m for five sports events including The Sun-Herald City2Surf and The Sydney Morning Herald Half Marathon, while the division’s seven business and food events (including the Night Noodle Markets, Good Food Month, The Australian Financial Review Business Summit and Women of Influence Awards) are being retained by NEC. Ironman is a division of Wanda Sports Holdings, of Guangzhou, which also owns Australia’s Hoyts Cinema chain. The group operates 230 sports events in 53 countries, including the Blue Mountains ultra trail race and Noosa Runaway marathon, in Australia.
The deal follows NEC’s A$125m sale last month of the former Fairfax regional newspapers to a consortium led by the former CEO of NEC’s Domain property digital which itself is believed to be of interest to News Corp (owner of the rival REA). But there has been no confirmation of any negotiations about it. NEC is reportedly struggling to sell the former Fairfax operations in New Zealand.
B2B/B2C. Remedy Health Media, of the US, digital publisher of Health Central, Health Central Guides, TheBody and TheBodyPro, has acquired Vertical Health which produces content for patients and healthcare professionals across diabetes, mental health, and pain management. Its brands include EndocrineWeb, OnTrack, Diabetes, PsyCom, Spine Universe and Practical Pain Management. Remedy has private equity backing from Topspin Partners.
News. The privately-owned Illiffe Media Group, of the UK, has acquired local paper the Newbury Weekly News via a JV with Peter Fowler. The new Newbury News and Media will be a unit of Iliffe Media Group which was re-started in 2016, launching the Cambridge Independent and subsequently growing through acquisition. Its former family-owned portfolio of newspapers was sold to Local World (along with the regionals of DMGT) and then acquired by Reach Plc (formerly Trinity Mirror). In 2017, it acquired 13 regional papers from Johnston Press for £17m. The Newbury Weekly News was established in 1867 and has been family owned until now. The sale competed on May 1 and terms have not been disclosed.
B2B. Webedia, the French media-tech company, has bought Quill, of the UK, from its private equity owner Panoramic Growth Equity. Quill provides content for e-commerce operators. The company was founded in 2011 and has grown rapidly with clients including eBay, Google, Louis Vuitton and Tommy Hilfiger and estimated revenue of £7m for the current year. Founder-CEO Ed Bussey will continue to run the company. The acquisition will give Webedia a combined network of over 7,000 freelance content creators, expanding the B2B capability of the previously entertainmen- focussed company. Terms were not disclosed.
B2C. Canadian e-sports and video game developer OverActive Media (parent of Splyce and Toronto Defiant) has acquired Toronto e-sports company MediaXP and subsequently launched a live events division, OAM Live, with the aim of developing a global e-sports platform. MediaXP was founded in 2015 and clients include Dome Productions and Red Bull Canada.
B2B. UK quoted information and exhibitions group Informa is continuing its portfolio management journey (following its acquisition of UBM) with an exchange of assets with IHS Markit. Informa is to exchangs its Agribusiness Intelligence portfolio (operating in the UK, North America, Europe and the AsiaPacific) for IHS Markit’s Telecoms, Media and Technology subscriptions, research and consulting brands.
The deal will strengthen Informa’s position in IT, Communications, Security and Transformational Technology and expand its reach into Asia and North America, with revenues for the enlarged Informa Tech division expected to total $350m. IHS Markit is committed to expanding in Agribusiness. The deal values the two businesses at similar EBITDA multiples, with Informa paying $30m in cash to reflect the higher EBITDA of the TMT business. The transactions should complete in July, subject to regulatory approval.
The deal will have disappointed the private equity owners of the UK-based AgriBriefing which had hoped to effect a transformation, with acquisition of Agribusiness Intelligence. It must now hope to acquire Kynetec, the £40m-revenue, 17-year-old farming market research specialist which had been divested by Frankfurt-based GfK in 2016. The Inflexion private equity-owned company has become a world leader following acquisition of an Ipsos subsidiary in North America and Market Probe in Continental Europe. AgriBriefing grew by 50% in 2018, including through the successful acquisition of GDS, in France, and Urner Barry, in the US. The enlarged company made EBITDA of £6.8m (2017:£4.6m) on revenue of £27.4m (£19.2m). Some 50% of revenues derived from the UK (2017: 74%), 35% of revenues came from the US. The company employs 186 people.
Magazines. Singapore-based music-making platform BandLab Technologies, which last year acquired Guitar and MusicTech magazines, is increasing its investment in media by buying New Musical Express (NME) and Uncut from TI Media (formerly Time Inc UK).
NME was one of the UK’s oldest music weeklies and (copying America’s Billboard) became the first to publish the record charts when it launched in 1952 as “The Accordion Times and Musical Express”. Its early website, launched in 1997, quickly became one of the world’s largest music sites. But weekly circulation, which had peaked at 300k in the 1960s, fell to just 15k by 2015 when it became a 300k free weekly. After incurring losses of at least £2m for two years as a free magazine, NME ceased printing and became digital-only (and profitable) in 2018. Uncut was launched 22 years ago and currently sells some 40k copies, about 50% of its peak. The monthly is believed to be making profit of some £600k, half of which is generated by bookazine-priced specials produced from the NME archives.
NME and Uncut are being acquired for some £7m, an above-average 8x EBITDA price that might partly reflect the value of the 65-year archive. It is believed that BandLab plans to revive NME as a monthly print magazine.
The music magazines are among the first divested by TI in plans to trim the company’s 40-brand portfolio. The former IPC Magazines, which once accounted for more than 50% of all magazines sold in the UK, now has revenues of £200m, 30% down in the last three years. Operating profit in 2017 was £20m, just enough to meet the rationalisation costs of the company which, 12 years earlier, had pre-tax profits of £70m.
The publisher, whose major brands include many of the UK’s best-known magazines including Country Life, Woman’s Weekly, Woman & Home, Yachting World, Ideal Home, and Wallpaper, may generate 50% of its profits just from the TV listings market where What’s on TV and TV Times magazines have an aggregate weekly circulation of 900k. While the company has been usefully diversifying into TV production with documentaries for the BBC and A+E, TI Media’s future success will depend on a more focused portfolio and some targeted digital investment to shift the emphasis from magazines.
The company’s broad reach belongs to an era when publishing groups enjoyed scale economies in sales, marketing, printing and distribution. It must now find a new rationale. Perhaps some of the TV/video production, events, research and marketing services that have been serving the magazines could become self-standing businesses. A media company which habitually spends time and money explaining to advertisers how consumers spend theirs could, for example, grow a market research business.
One long year after it acquired the publisher for £130m, Epiris private equity has a slim-down growth plan and will be expecting newly-appointed chairman Tim Weller to expedite it. But, in the week when specialist media group Discovery Inc acquired Golf Digest magazine, the Singapore company buying TI’s music magazines demonstrates how the content, brands and relationships can be catalysts for digital media.
BandLab is an easy-to-use, all-in-one, social platform that enables creators to make music with fellow musicians everywhere. BandLab combines music making and collaboration tools like the world’s first cross-platform, cloud-based ‘Digital Audio Workstation’, with video sharing and messaging – across Chrome, Android and iOS. The service can be used on smartphone, laptop and even wearables, so people can make music anywhere, anytime and get feedback from others. It is a completely free and unlimited service. The monetisation comes from BandLab companies selling musical instruments and kit, including Swee Lee, the 73-year-old Singapore company that is Asia’s largest music retailer.
Having acquired the MusicTech and Guitar magazines from Anthem Publishing last year (but failing to acquire Rolling Stone magazine), CEO-founder Kuok Meng Ru is reminding us that such content (and even print itself) can play a key role in a community of enthusiasts. He is a guitar-playing music enthusiast who avidly read NME at school and university in the UK. He says BandLab was born out of a frustration that, even though tech has raised the quality of the music-making process, it has made it more fragmented.
The brilliant three-year-old BandLab platform now has 7m registered users from 130 countries making more than 2m songs every month and it’s growing fast. Last week, it was showcased at the prestigious annual Google I/O conference in Mountain View, California, where it wowed 7,000 leading Android developers with its role both as a creative tool in paediatric cancer care (students banding together to cheer up a terminally ill child and bring his favourite things to life using video, art, and music); and in the production of a commercial dance track (produced by three artists collaborating from the US and UK) which made the top 10 dance chart.
Kuok’s declared mission is “a world in which there are no barriers to the making and sharing of music – regardless of where you come from, what music you’re into or how much you earn. We are humbled by the fact that the growth of our user base, music creation and increasing engagement rate shows we’re delivering somewhat on what you (both creators and listeners) want and are looking for.” That’s the passion digital entrepreneurs can bring to global media networks produced ‘by enthusiasts for enthusiasts’. Specialist magazines are no longer dominant, but they can still be a key part of the mix.
All Media. Discovery Inc, of the US, has acquired the monthly magazine Golf Digest from Condé Nast in a deal estimated to be worth $30-35m. Discovery is making a push into golf entertainment with a 12-year, $2bn PGA Tour contract, a content deal with resurgent champion Tiger Woods, and its GolfTV streaming service which offers instruction, equipment advice, course rankings, travel destinations and online bookings to subscribers.
Golf Digest will continue to publish in print. The monthly magazine, which has licensed editions in more than 60 countries, had previously been purchased for about $400m in 2001. It claims 4.8m readers, 2.2m social followers, and 60m video views. David Zaslav, Discovery president/CEO, said: “Golf Digest is a world-class brand that has become the ‘go-to’ authority for millions of golf enthusiasts, professional players and global advertisers”.
The acquisition shows how digital media can make good use of magazine brands, content and relationships to augment multi-platform global networks. It also highlights the strategy of Discovery as a company which has come a long way since the pioneering launch 34 years ago of the eponymous documentary TV channel.
It is now the self-described global leader in “real life entertainment”, serving a passionate audience of “super fans” around the world with content that “inspires, informs and entertains”. Discovery delivers over 8,000 hours of original programming each year to 220 countries in 50 languages. Its brands include: Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, Motor Trend, Animal Planet, and Science Channel, as well as OWN: Oprah Winfrey Network in the US, Discovery Kids in Latin America, and Eurosport.
Increasingly, the $11bn-revenue Discovery (60% US) is a collection of global special interest networks connected variously by broadcast, online, events and (perhaps) magazines. At the recent Deloitte media conference in London, Discovery international CEO J.B. Perrette, marked the 3oth anniversary of Discovery’s first launch outside the US by contrasting the streaming strategies of Netflix, Amazon, Apple et al (“whose strategy is to enable viewers to escape and lose themselves”) with Discovery’s “totally different strategy: Real life entertainment is even more powerful because that’s where people come to find themselves. We power people’s passions. We build communities of fans and target groups who want to ‘view and do’. We are all about Entertainment, Information and Empowerment across all screens”.
He noted that one key to the Discovery strategy has always been to own almost all of its content for every platform in every market round the world – “even when the world was linear”. That is now paying off.
The Discovery strategy effectively challenges the “by enthusiasts for enthusiasts” magazines which have long dominated special interest media. Discovery’s acquisition of the UK-based Global Cycling Network from long-time magazine executive Simon Wear, Golf Digest and GolfTV, and Motor Trend (the 2017 acquisition of which marked the company’s first direct-to-consumer online service in the US), are all signs of how major special interest verticals are becoming global and may be dominated by the owners of online video, not just of print and digital text. And you can imagine the scale of opportunity in product merchandising.
We may expect Discovery to keep making acquisitions of digital media and magazines in sports, travel, science, and food as it develops its global all-media networks. With declining profits, even strong magazine brands and their digital offerings are relatively cheap, especially for companies which have other ways to monetise. For media which can captivate viewers with exclusive video, perhaps magazines will even become stylish content marketing. The Discovery strategy may just help to guide the ambitions of newspapers, magazines and broadcasters who should buy and build multi-platform partnerships to emulate it in their best verticals.
Events. Immediate Media, the UK’s most profitable magazines group, is expanding further into consumer exhibitions with the acquisition of the six-year-old River Street Events, which organises food and gardening events. It is acquiring a majority of the company immediately and will buy the remaining shares in 18 months. Its most successful annual events include the BBC Good Food Show and BBC Gardeners’ World Live (linked to Immediate magazines) which together attract attract over 250,000 visitors. In 2017, the company had revenue of £6.9m and recorded a £364k loss.
It is thought that the price paid will depend on trading in 2019-20, during which the events will continue to be managed by its founder Laura Biggs. The initial payment is no more than £2m. In January, Immediate acquired Upper Street Events, producers of some of the UK’s largest specialist consumer enthusiast exhibitions including the Cycle Show, Festival of Quilts, Move It, London Art Fair and The London Cruise Show. It said then that integrating Upper Street into existing operations would more than double the exhibition company’s £1m profits – even before creating new events. This latest acquisition brings Immediate’s annualised events revenue to £19m – about 7-8% of the total. It is hungry for more.
Immediate is only the latest UK magazine company to chase consumer exhibition profits. Significantly, most UK-based exhibitions companies are preoccupied by B2B not consumer shows and passed up the opportunity to bid for either of the companies acquired by Immediate. The privately-owned Media10 is the country’s largest consumer show organiser with £45m revenue, including the 110-year-old Ideal Home Show. But even it is diversifying into trade shows in the UK and internationally in order to sustain profit growth. However, media everywhere is chasing “experiential” revenues because consumers are responsive. Immediate might just be stepping up its efforts at the right time.
The company – a wholly-owned division of Burda – publishes across special interest sectors, including Food, Cycling, Gardening, Parenting, Weddings and Crafts. Its 75 consumer brands include: BBC Gardeners’ World magazine, BBC Good Food, Mollie Makes, Cycling Plus, Hitched, and Britain’s most profitable magazine, the Radio Times. Immediate has a monthly audience of some 19m people, sells 75m magazines annually, has 90 licensed international editions, is digitally much smarter the magazine-media average – and keeps growing. That’s why its exhibitions strategy is worth watching.
B2B information. Dublin-based ION Investment Group is to acquire a controlling stake in Acuris (publishers of MergerMarket and Debtwire) from BC Partners and GIC. BC and the Acuris management will retain minority stakes, with the former thought to have 24% of the equity. The deal values the company at £1.35m, some four times the price BC paid Pearson for the business six years ago – and 13 x what Pearson had paid seven years before that. ION is backed by private equity group Carlyle and has become a major financial software company across Europe.
Acuris was founded as MergerMarket in 1999 and bought by then Financial Times publisher Pearson for £101m in 2006. It was subsequently acquired by BC Partners for £382m in 2015, with GIC acquiring a 30% stake two years later. Acuris claims 115,000 daily users across 5,000 corporate subscribers, and employs 1,500 staff in 66 locations around the world. It faces increasing competition from Pitchbook (owned by Morningstar) and Bloomberg.
Magazines. Dotdash has bought Brides magazine from Condé Nast after the magazine was touted for sale. Terms were not disclosed. Dotdash is part of InterActiveCorp (IAC) which owns dating sites Match, OK Cupid and Tinder. Brides will join Dotdash’s stable of titles aimed at millennial women including MyDomaine, The Balance and Verywell which in total yield 100m monthly unique visitors. The Brides print magazine will no longer be produced but eight staff will transfer and work on a redesigned website. Brides had 3.6m monthly uniques in March, a figure which has doubled in four years, while print readership has declined to around 300,000.
Sound + Vision. Disney has reached agreement with Comcast to take control of the Hulu streaming service that (sort of) rivals Netflix in the US. Comcast will sell its 33% stake at some point in the next five years at an independently agreed valuation. The deal allows Disney to take operational control immediately and enables Comcast to realise a growth valuation. Hulu was founded in 2006 as a joint venture between media businesses and has grown to reach a subscriber base of 28m with further growth to 40-60m subscribers expected in five years. Hulu added 3.8m subscribers in the first four months of 2019. Disney is to launch its own streaming service(s) later in the year. The Comcast stake will not fall below 21% and the deal will therefore guarantee an exit of at least $5.8bn.
Books. Kane Press, the New York-based children’s book publisher owned by China’s Thinkingdom Media Group, has acquired the trade publishing division Boyds Mills Press from Highlights for Children. The sale includes Calkins Creek and WordSong imprints but excludes Highlights Press and Highlights Learning. The enlarged company will be named Boyds Mills & Kane.
Classifieds. A bid for the 20-year Munich-based digital classifieds group Scout24 by US private equity companies Hellman & Friedman and Blackstone has failed to get the backing of 50% of shareholders, despite the support of the board. The bid was worth €5.7bn, which fell short of the expectations of institutional investors in the company which has no dominant single shareholder. Scout24 is best known for its Immobilien Scout24 property listings in Germany and pan-Europe AutoScout24 car listings.
The bid had marked a return by Hellman & Friedman and Blackstone, which had overseen Scout24’s IPO in 2015.
Scout24 was founded in 1998 by Beisheim Holding Schweiz AG. AutoScout24 and ImmobilienScout24 became the first online marketplaces. It then launched FinanceScout24, JobScout24 and FriendScout24. In 2001, it expanded into Italy and Spain. It acquired Immobilien.net, a leading digital real estate marketplace in Austria, and FlowFact, a provider of software for real estate agents, and Easyautosale. Its expansion has continued, particularly in the Netherlands, Germany and Austria.
In 2018, the company EBITDA of €291.5m on revenues of €531.7m (55%).
If the private equity bid for Scout24 had succeeded, it is believed the new owners would have immediately bid for the $1bn-revenue eBay classifieds business which is up for sale. Most of its revenue comes from outside the US and it has 10 brands including Gumtree and Kijiji across 25 countries. More than 50% is in the German market, where eBay Kleinanzeigen is more popular than Craigslist. It is estimated that the eBay classifieds group could be worth $8-12bn (about one-third of the US parent’s total market value).
Axel Springer has declared an interest in bidding for the eBay classifieds. That is assumed to mean that the company (whose Immowelt competes with Kleinanzeigen) must be exploring a tie-up with a private equity firm, perhaps on the lines of an earlier digital classifieds partnership with General Atlantic. But Springer has also long been close to Hellman & Friedman which has been a shareholder, so it may already be happening. A Springer acquisition of eBay classifieds would be subject to challenging competition investigations in Germany and the EU.
Alternative bidders would include private equity firms, but also News Corp which has strong property digitals, especially in Australia and the US. In the frame also will be Adevinta (the recent $6bn classifieds spin-off from Nordic news group Schibsted) which operates ‘boot sale’ digital marketplaces in 16 countries in Europe, Latin America and North Africa. Its leading brands include Leboncoin in France, InfoJobs (Spain), Shpock (UK), OLX (Brazil), Subito (Italy) and Jofogás (Hungary). Might there really be a chance of a Springer-Adevinta merger to create an unrivalled global classifieds leader?
Sound + Vision. Netflix has acquired StoryBots for an undisclosed sum. StoryBots is a children’s media brand created by brothers Gregg and Evan Spiridelli in 2016, known for the series Ask The Storybots (in which five characters answer common children’s questions) which was first shown on Netflix. The acquisition is only the third made by Netflix, this coming as the company gears up to compete with Disney’s new streaming services later this year. Terms of the transaction were not disclosed. “Together with Netflix, our goal is to make StoryBots the leading educational entertainment brand for connected kids and families globally. We see this as a once-in-a-lifetime opportunity to bring something epically good into the world,” said Evan and Gregg Spiridellis.
All media. The Berlin-based Axel Springer is selling its 51% share in the @Leisure Group, of Amsterdam, a rental company which offers more than 100,000 holiday homes across 50 countries. The buyer is OYO Hotels & Homes which is paying Springer €180m – equivalent to 15 x EBITDA – for the company which generated €24m profit in 2018. The divestment signals the German group’s decision to concentrate on its digital classifieds in jobs, real estate and cars.
The deal coincided with softer revenues and profit from Axel Springer in the first quarter of 2019: a strong performance from online classifieds failed to offset the weakness of news media. Total revenue fell slightly to €771.8m, while EBITDA fell 7% to €113.4m, partly as a result of last year’s sale of the French site aufeminin.
But the family-controlled, listed Axel Springer is a star performer. A 10-year financial comparison makes the point. First quarter revenue in 2019 was 24% ahead of the the comparable period for 2009, EBITA was double, and margin was up from 13% to 22%. Digital media which, in 2009, was a mere 17% of revenues now accounts for 74% (and 87% of EBITDA). The company whose revenues less than 20 years ago were almost 100% German, is now 45% international (more than doubled since 2009). It employs some 16,000 people – 50% more than in 2009.
In 2018, it made €738m EBITDA on revenue of €3.2bn.
It is difficult to exaggerate the significance of these stats and the transformation behind them. It is only 21 years since Mathias Döpfner, a music critic, became editor-in-chief of Die Welt (Springer’s quality daily which is published alongside Europe’s most successful tabloid Bild). Not many years before, he had been playing bass guitar in a rock band, and also managed a concert agency. Döpfner was different and maybe not just because he was a musicologist who loved James Brown, Aretha Franklin and also Mahler. But some signs of the future media leader could be seen in his comprehensive revamp of Die Welt. In 2000, his editorial comment outlined the three priorities of business leaders in the future: “First Internet, second Internet, third Internet.” Then, he got the chance to put it into practice in a company that had lost its way – even before the internet had taken hold.
In 2002, he took over from former News Corp boss Gus Fischer, after rising print costs and advertising cutbacks had pushed Axel Springer into its first-ever annual loss. The new CEO cut jobs, and integrated print and online newsrooms. But, even while he was cutting back, he pushed into new markets, launching the Polish tabloid Fakt that became the country’s bestseller in its first year. And the restless search for new opportunities has been snowballing ever since. In the past 15 years, the CEO’s strategy for the digitalisation and internationalisation of Springer has been characterised by active digital investment in:
- Online classifieds, especially outside Germany where it is a disruptor with no legacy media to defend
- English language digital media, especially in the US
- Its core daily newspaper brands Die Welt and Bild
- Startups in the US and Europe
Döpfner has sold swathes of magazines and regional newspapers while investing some €5bn in the acquisition of more than 40 digital companies including including jobs site StepStone, French real estate site SeLoger.com, and ads aggregator Awin. One important symbol of the company’s success in transforming its legacy media is Bild which had often accounted for more than 100% of the company’s profits. While the racy tabloid (which also spawned a raft of bestselling specialist magazines across sport, motoring and computers) now sells less than 30% of its peak 5m circulation, its Bildplus web site has more than 400,000 subscribers paying up to €13 a month.
For all the worldwide profits from digital classifieds (60% of EBITDA), Axel Springer and its CEO still live and breathe journalism. Its web site declares: “The soul and spirit of Axel Springer is journalism. Our mission: The successful establishment of independent journalism in the digital world. We want to become the most successful digital publisher worldwide.”
More than a decade ago, Döpfner spoke about Riepl’s Law, named after the German newspaper editor who had declared: “New media do not replace existing media. Media progress is cumulative not substitutive.” In some ways, the key to Springer’s success has been its determination equally to preserve its news legacy and to buy and build new profit streams. It’s reflected in the digitalisation of Bild and Die Welt, and investment in the all-digital Politico, Business Insider, Upday, and eMarketer.
The company’s journalism now reaches 300m – x3 in five years. While much of that growth has come from the unpaid audiences of Business Insider and Upday, the paid-for Bild and Die Welt have together built 500k subscriptions. Bildplus itself is claimed to rank fifth worldwide among paid-for journalism and to have the largest number of paying subscribers outside the English-speaking territories. The three-year-old Upday (embedded in Samsung smartphones and tablets) claims to be the largest news app in Europe with more than 25m monthly uniques in 16 countries. At a time when BuzzFeed, HuffPost et al are struggling to make digital news pay, Mathias Döpfner is bullish: “Digital journalism is becoming increasingly profitable at Axel Springer.”
Like Hearst in the US, the German company has proved to be a particularly good partner, collaborator and investor in joint ventures, partnerships and startups. Individuals and companies like doing deals and working with Springer. The fusion has paid-off with increasingly successful investments and a culture shaped by the best of Silicon Valley.
But there have been some expensive slips. German regulators blocked the company’s bid to buy ProSieben TV in 2006 and the following year it spent hundreds of millions on an unsuccessful bid to create a mail order rival to Deutsche Post. In 2015, Springer paid €450m for Business Insider (which always seemed like an inflated price) on the rebound from its failed €900m bid for the Financial Times. But BI is said now to be profitable, with some 15 editions, a worldwide audience of 140m, and a push into paid-for content.
Axel Springer’s overall transformation from a German newspaper and magazine publisher to a global digital media company with strong ties to the US has helped Döpfner publicly to challenge the practices of tech giants Facebook and Google. He has earned the right to be a powerful advocate for the business of journalism in a messy world of fake news and tech muscle.
That’s why it is easy to speculate that Döpfner still has ambitions to acquire a daily newspaper either in the UK (where he once bid for the Daily Telegraph, as well as the FT) or in the US, where Jeff Bezos owns the Washington Post and was formerly a fellow shareholder in Business Insider. What might a JV between the increasingly international New York Times and Axel Springer look like? Or some kind of Springer-led monetising merger of BuzzFeed and MailOnline?
For now, Döpfner may be keen to pay down a bit more of his €1.2bn debt before any big new deal. But the 73-year-old company is in great shape.
The Axel Springer reinvention has certainly required a lot of strategic courage, especially early on when the family-controlled company sold the TV listings magazine Horzu and the newspaper Hamburger Abendblatt, the two publications first launched in the 1940s by the late Axel Caesar Springer. With the acquisition of Die Welt, they had been the start of the company whose influence, reputation and profitability was transformed by the 1952 launch of Bild. Fierce criticism of the tabloid’s dog whistle populism punctuated Herr Springer’s life as a newspaper proprietor. He also fervently supported Israel and the reunification of Germany – and, symbolically, built his headquarters overlooking the Berlin Wall, which came down four years after his death.
Today, the controlling shareholder of the €5bn Axel Springer SE is Friede Springer, fifth wife of Axel (30 years her senior), whom she met when hired as a nanny to his two sons. They were married in 1978, seven years before Springer’s death. The relationship has, inevitably, provoked gossip, humour and litigation over the years. Frau Springer was, to say the least, unprepared for the demands of the business she inherited in 1985, the year of its IPO. The company lurched from one crisis to another across the next 15 years. And, then, along came Mathias Döpfner whose meteoric rise ended an extraordinary spell of erratic management, expensive adventures, and shareholder manoeuvres that might have consigned the whole company to the history books had they occurred a decade later, in the heat of digital challenge. Döpfner became CEO the year after it made losses of almost €200m. Back then, he did not seem likely to become a global industry leader. But neither did his company. Wow.
MAG has strong information and events in three main B2B groupings: Health, Education and Social Care; Engineering; and Music. The company has become a strong exhibition organiser as well as a solidly profitable publisher of B2B magazines. Its 2017-18 revenue/ EBITDA was £43m/£7.2m (2016-17: £37.1m/£5.5m). Current year revenue is expected to be some £55m, with about 40% from exhibitions (all acquired or launched in the last seven years).
B2B. Alma Media, of Finland, has acquired tukkuautot.fi, a three-year-old marketplace for automotive industry professionals, for an undisclosed price. Last year, the company had a revenue of €950k. It is claimed to be the largest B2B auction platform of its kind in Finland.
The €350m-revenue Alma Media is a 170-year-old Helsinki-based public company which has been expanding from Finland to the Nordic countries. Currently, some 30% of its 1,900 people work outside Finland. Its media activities range across all-digital (eg jobs classifieds), business and financial newspapers and books; and consumer newspapers and specialist media.
Books. Penguin Random House Grupo Editorial, the global Spanish-language division of Penguin Random House (PRH) is acquiring the 10-year-old Barcelona-based independent publisher Ediciones Salamandra. The deal expands PRH’s market share in the Spanish-language following its acquisition of Santillana Ediciones Generales (2014) and Ediciones B (2017). PRH, the world’s largest trade book publisher, was formed in 2013, by Bertelsmann and Pearson, which own 75% and 25%, respectively.
Sound & Vision. Sinclair Broadcast Group, Inc, of Maryland, US, is paying $10.6bn to buy the 21 Regional Sports Networks and Fox College Sports, which were acquired as part of Disney’s acquisition of Twenty-First Century Fox, subject to regulatory approval.
B2B. Following last week’s merger announcement of McGraw-Hill Education and Cengage, another higher education publisher is making a major move. John Wiley & Sons, Inc, of the US, is acquiring the assets of the 11-year-old New York-based Knewton, a provider of affordable courseware and adaptive learning technology for an undisclosed price. Knewton’s Alta platform delivers content to more than 300 colleges and universities. More than 15m students around the world are said to have used Knewton-powered courses to date, at a cost of about $40 per course. While the price is not being disclosed, Knewton has been in receipt of more than $180m in venture capital funding but it has struggled to establish its value in the fledgling adaptive-learning marketplace, so may not have recouped the investment. In 2017, Pearson, one of Knewton’s largest partners (and also an investor) decided to stop using its technology.
B2B. The Netherlands-based €4.3bn-revenue Wolters Kluwer has sold its 40% of the Austrian information specialist MANZ’sche Verlags- und Universitätsbuchhandlung GmbH for €17m in cash. But its most significant corporate development this week was a malware attack on the Dutch company’s tax and accounting software platform which has paralysed many accounting firms for days. It has sparked concerns about the security of the tax return and financial information stored on the company’s cloud servers. Wolters Kluwer provides software and services to all of the top 100 accounting firms in the US and 90% of top global banks.
The Economist this week appointed Lara Boro, CEO of Informa Intelligence and former boss of Middle East Economic Digest (MEED), to succeed Chris Stibbs who has been CEO for the past six years. The Economist is the UK-based media company whose 175-year-old eponymous weekly “newspaper ” is widely hailed as a post-digital success with its brilliantly crafted journalistic offering, functional non-nonsense design, and distinctive marketing. Everybody respects and admires The Economist whose red-box logo confers gravitas on coffee tables in corporations, parliaments and palaces everywhere.
It is a magazine with presence. That’s why its claimed renewed success has been so easy to accept. But the numbers tell a slightly different story. Operating profit of The Economist Group (70% of which is the The Economist itself) has fallen by 21% to £47m in the five years to 2018, with margin slashed from 20% to 13%. Much of that profit has been lost in the collapse of advertising (down 25% in the last three years). Of course. But that too is only part of the story.
The Economist is sometimes said to have more than made up for its lost advertising with accelerating subscriptions. But, in its 2018 annual report, chairman (and former Economist editor) Rupert Pennant-Rea reported that even a 33% increase in subscriptions revenue had come expensively: “Revenues increased by 4% to an all-time high, but costs rose even more. The result was a 2% decline in profit…” There was another big increase in marketing, which rose to £50m (compared with £37m in the previous year). And this led to the net addition of a mere 36k full-price worldwide subscribers to its 1.1m total. (In financial terms, the paper showed the full benefits of the 20% cover price rise in 2016, with revenue per copy up 10% on the previous year.)
Pennant-Rea added: “The cost of acquiring new subscribers… rose, by an average of 22%; for the circulation strategy to succeed in the long term, this cost must be tightly controlled.” That amounts to harsh criticism in the measured tones of The Economist. But, in 2017 (when profit had fallen by 13%), the words sounded like a public warning to the CEO: “Last year was painful. The headline figures—operating profit down 11%, even though revenue was up 7%— show the effect of continuing to lose high-margin advertising, but, in other respects, they flatter the Group’s performance. Both revenue and profits benefited from a stronger dollar; without it they would have fallen by 3% and 18% respectively.”
Stibbs’ resignation was announced in November, just three months after he negotiated the sale to FiscalNote of the US Congressional publisher CQ-Roll Call for a (mostly equity) price estimated to be 6-8 x operating profit. The divestment was an uneasy case of a young upstart buying a traditional, profitable competitor on soft terms. The combination marries CQ-Roll Call’s news, legislative tracking tools, vote databases and analysis with FiscalNote’s technology platform. But The Economist’s anonymous reporters, so good at puncturing egos and seeing through the hype, might have laughed at FiscalNote’s claim to be “a technology innovator at the intersection of global business and government that provides Advanced, Data-driven Issues Management Solutions”.
Whether or not the CQ-Roll Call divestment is considered a good deal may ultimately depend on whether an expected FiscalNote IPO gives The Economist an opportunity to cash in its shares. The money matters because, for all the age-old constitutional protections for The Economist, its governance, and editor-in-chief, this is a business with some large financial family shareholders and a dividend policy that pays out most of the profits every year. It’s not a charity and – three years after the Financial Times sold its 50% shareholding – The Economist Group board has been feeling the heat.
These are tough times for traditional media everywhere and the financials show that the individualism and prestige of The Economist provide no immunity. The challenges are familiar: how to grow subscriptions and and (at least) stabilise revenue for a brand whose profitability is provided by what’s left of print advertising. Last year, another steep decline in revenue meant that only 17% of Group sales came from advertising, compared with 23% two years before and and more than 40% eight years earlier.
At the recent Digital Media Strategies conference in London, The Economist’s circulation boss presented a stimulating view of its marketing strategy but quoted one of the challenges as subscribers who say: “As a new subscriber, I’m constantly overwhelmed by the amount of content I need to read each week. I can hardly keep up.” It’s a common enough view especially from quick-scan millennials lacking traditional affection for print. But there’s nothing like a pile of unread magazines for prompting even established readers to re-consider whether a brand is really for busy people like them. And the fact that The Economist brazenly claimed 18% new subscriptions last year (even though the actual increase, net of cancellations, came to a tiny fraction of that) shows just how leaky is the bucket it is constantly trying to fill.
That should prompt The Economist to work towards real digital customisation: giving each reader exactly what they want – and, in exchange, charging a proportionately higher price. That’s the challenge for many B2C media and might just be on the agenda for the new CEO – eventually.
Before then, she must turn her mind to more familiar B2B challenges: how to restore growth at the Economist Intelligence Unit (EIU), the research and consulting business which “helps businesses, the financial sector and governments to understand how the world is changing and how that creates opportunities to be seized and risks to be managed.” EIU routinely claims to be the world’s best “for-profit think-tank”. It has a particularly strong position with government and multilateral organisations but has struggled for new consulting business particularly in its healthcare arm.
That should be food and drink for Lara Salameh Boro who comes to The Economist with high-level B2B strategy skills and a general management track record that was burnished by a successful few years running the MEED information and events group in Dubai, after a tech-powered career variously at CPA Global, the Financial Times, and Mondex International. She is currently heading a £300m-revenue division of Informa with 100 digital subscription products and more than 1,000 people. Boro is highly analytical, good with teams and quick to identify growth opportunities. She’s grounded, rounded and a perfectly international leader for The Economist. At Informa, instructively, she is impatient with the reluctant process of divesting unwanted operations. But CEO Stephen Carter has taught her a lot about business transformation.
The new Economist CEO will hit the ground running at EIU and will be keen to build out its B2B media, maybe more deeply into finance, law, commodities, and technology. Why wouldn’t the EIU start to target commodity ‘price reporting agencies’ like Euromoney has been doing? Perhaps her strategy will be to create (and acquire) global information brands in sectors where EIU already has a strong franchise, as well as finding ways to win new research contracts.
Many traditional B2B media groups are still trying to escape their dependance on magazines (in print and digital) by diversifying into research, data and consulting. The EIU is well ahead of that part of the game and could use its high-value subscription business to deepen its immersion in global information verticals. One of the many clever Economist outdoor ads proclaims: “Two thirds of the globe is covered by water. The rest is covered by The Economist.” Watch Lara Boro make waves.
Books. US educational publishers McGraw-Hill Education and Cengage have agreed an equal terms stock merger expected to complete early in 2020. If approved by the regulators, the merged company will challenge the Pearson market leader, as online competition threatens textbook publishers. The new company, which will be called McGraw Hill, will become the second largest company in the US market.
The two private equity-owned businesses, which have both struggled with a new textbook downturn, are expected to reduce their prices and invest in digital on the back of annual cost savings of up to $300m. The combined $5bn listed company, with revenues of $3.2bn, will have 44,000 textbook titles. But the real promise of the merger is the scope for the huge expansion of the ground-breaking digital platform Cengage Unlimited which was launched this year.
The subscription program charges students $179.99 a year for unlimited access to online textbooks. The potential of this service has been spelled out by reference to the ‘Netflix for textbooks’: “For a flat fee, students get every educational product created by the largest academic publisher in the US, all at their fingertips, on their tablets, computer, or smartphone instantly.” It also enables subscribers to get free rentals of print textbooks, paying just for the shipping. The University of Missouri was reportedly the first to offer this plan to all students in January
Cengage was formerly known as Thomson Learning before a 2007 sale to Apax and KKR private equity. Heavy borrowings and the combination of online texts and textbook rentals led the company to file for bankruptcy in 2013. It emerged the following year with an increased focus on digital. Apollo private equity acquired McGraw-Hill’s education division for $2.4bn in cash in 2013, ending a plan by the publishing group to IPO the division separately from its financial businesses, now known as S & P Global Inc.
Cengage reported recently that the US higher education textbook industry is in a “vicious cycle” of losing business to book rental services. The company made a net loss of $2m on $1.5bn of revenues in 2017-18. In 2018, McGraw-Hill Education reported “total billings” of $1.7bn – and post-interest losses of $160m. With $3.2bn of revenues, the merged business will remain substantially smaller than Pearson, which reported 2018 sales of $5.4bn. Combined revenues should be in the region of $3.2bn with EBITDA of $900m.
The Cengage all-you-can-eat Netflix-like subscription service should set other media companies thinking. Why don’t daily newspaper publishers form partnerships to offer online readers a whole bundle of daily papers for a single subscription price? Once they have (finally…) realised that most people are never again going to pay for news, quality newspaper publishers should realise that those who do pay for an online news brand are their best prospects for yet more. It’s the case for an imaginative bundle of a deal. Go on…
News. Irish newspaper company Independent News and Media (INM) has agreed a sale to Mediahuis, of Belgium, for a reported €146m, a dramatic reduction in value from pre-2008 values. Major shareholders Denis O’Brien (who held 30%) and Dermot Desmond (15%) reportedly sold most of their shares to Mediahuis on Tuesday. Mediahuis, publisher of De Telegraaf and NRC Handelsblad, in the Netherlands, and De Standaard, in Belgium, along with radio stations, now owns 27% of the shares which is sufficient to prevent a rival bid. The Belgian company was created in 2013 by the merger of the media companies Corelio and Concentra.
It is the company’s first expansion outside its core Dutch-language market where had revenues of €819m in 2018. The deal valued the company at 10.5 cents per share, up 44% on the April 3 closing value, bringing complaints from smaller retail investors. Mediahuis claimed that the price reflected the issues INM has had with data breaches, still being investigated. INM brands include the Irish Independent, Independent.ie, Sunday Independent, The Herald, Belfast Telegraph and a range of regional newspapers. O’Brien will continue to own his stable of national and regional radio stations which are not included in the sale.
The sale is the end of an era for INM which was, for a brief shining moment in the 1990s, a global newspaper group with operations in the UK, Australia, New Zealand, South Africa, and Ireland. It was controlled by the former Irish international rugby star Tony O’Reilly who, in a glittering corporate career became president of US foods group H.J. Heinz while also building up INM. But the man who became Ireland’s most famous business leader on his way to becoming the country’s first billionaire came crashing down to earth and eventual bankruptcy, through unwise investments in media and in the troubled Waterford Wedgwood crystal and pottery group.
He lost an expensive boardroom battle with Denis O’Brien who became INM’s largest shareholder and resented the O’Reilly family’s proprietorial approach to investments in what had become a substantial public company. O’Brien has now negotiated the sale of INM reportedly for half the price he paid just for his 30% of the shares. No winners.
Sound+Vision. Altice USA, a large broadband communications and video services company based in the US, is to acquire digital news company Cheddar in a deal reported to be worth $200m. The company, dubbed the “CNBC of the internet,” focuses on business news with 19 hours of programming per day.
It is viewable in 40m US homes on Sling TV, DirecTV NOW, Hulu, YouTube TV, Sony PlayStation, Vue, Snapchat, fuboTV, Philo, Amazon, Twitch, Twitter, Facebook and 60% of smart TVs. Cheddar claims to attract 400m monthly video views. Cheddar founder and CEO Jon Steinberg (ex BuzzFeed and MailOnline) will stay on to lead Altice News, which now includes Cheddar, News 12 and i24NEWS, an Israel-based 24-hour international news network.
Cheddar launched in 2016 with Altice as an early investor, along with Amazon, AT&T, Comcast Ventures, Goldman Sachs, the New York Stock Exchange and other VCs. It is said to be on track to generate $50m of advertising in 2019.
News. Nine Entertainment Company (NEC), of Australia, has now agreed the disposal of its regional newspaper division, Australian Community Media (ACM) which was formerly owned by Fairfax (acquired by NEC last year). Antony Catalano, backed by Thorney Investment Group, is to pay A$115m in cash for the 160-brand company in a deal which is expected to complete by the end of June. The price is less than 3 x EBITDA. Nine will apply the funds to pay down debt. Catalano is the former CEO of Domain, the property digital majority owned by NEC. This has led to speculation (see last week’s MediaDeals) that NEC might sell out of Domain. But, then, News Corp’s REA subsidiary is the Aussie property market leader and the Murdoch company is talking to NEC about all kinds of possible deals.
Events. Reed Exhibitions, a division of UK data-tech firm RELX, has acquired PackPlus, in India, from Next Events. PackPlus offers a series of trade shows targeting the country’s packaging industry. Packplus was launched in 2006 by company president Anil Arora, with an annual Delhi event. It now includes regional shows, including the Mumbai based Indian Packaging Show. Terms were not disclosed.
Magazines. American Media Inc (AMI) has sold the 93-year-old sensationalist US tabloid the National Enquirer, along with the National Examiner and The Globe, to James Cohen, former owner of Hudson newsstands in US airports and rail stations. The price was $100m. The brands reportedly generate almost $30m of EBITDA (about 25% of AMI’s total profit), although copy sales of the Enquirer have fallen from over 6m in the 1970s, to 500k in 2014, and only 218k now. The Globe also saw weekly sales fall 34% to 117k over the last four years.
For all that, the 10 weeklies in AMI’s celebrity group have still been selling 1m retail copies at an average cover price of $5.
The surprising profitability of the three divested weeklies is partly due to AMI’s low operating costs and high cover prices, and partly to National Enquirer’s diversification strategies which the new owner hopes to accelerate. It produces TV documentaries for Investigation Discovery and the Reelz channel, and operates theme parks in Missouri and Tennessee. For all the dirt, it’s a big brand.
The sell-off reflects the financial and political pressure to which AMI has been increasingly exposed. The company is reported to have a menacing $1bn in borrowings,re and efforts to refinance $400m of the debt apparently had to be scrapped last year after the publisher’s admitted involvement in paying hush money on behalf of President Trump, which was claimed to constitute unlawful election campaign expenditure. The sale proceeds will now be used to pay down debt and ease the pressure, just a bit.
National Enquirer’s continuing influence and ability to scare its political prey, despite reduced copy sales, is largely due to the simple fact that these magazines are sold principally at supermarket check-outs: their cover stories (and even some of the inside content) are seen by millions of shoppers waiting with their groceries. Like the UK national daily newspapers which similarly benefit from persistent “reviews” on TV and radio, many more millions see and hear the content than ever pay for it, and politicians know it.
That is the enduring power of the National Enquirer which, it seems, will now become a (sort of) collaboration between Pecker and Cohen, two old friends who, in 2011, together acquired the US edition of OK! magazine. Cohen’s company currently distributes AMI’s magazines and the acquisition includes a multi-year service contract that will apparently generate substantial fees for AMI to provide publishing, financial and distribution services for its former tabloids.
David Pecker will, therefore, still be involved in the magazines which have been a central part of his life for the past 20 years – and which have been sold at the direction of the company’s 80% shareholder Chatham Asset Management. The hedge fund had been under pressure from its own investors, which include several state pension funds, because of its connection to the Enquirer.
The world’s most famous tabloid had been accused of covertly helping President Trump to win the 2016 election (including through “catch and kill”: buying-up seriously negative stories and not publishing them). But some of the stories it did publish were just as outrageous, including claims that presidential candidate Hilary Clinton was dying (and would be dead soon after the election), that President Obama had bugged Candidate Trump, and that another Trump rival Ted Cruz’s father was implicated in the 1963 assassination of President Kennedy. No story seems to have been too wild to tell in pursuit of copy sales and/or favours for friends, especially the man who would become President. More recently, the National Enquirer has been accused of blackmailing Amazon boss Jeff Bezos with lurid personal pictures. For the majority shareholder, that was one sensational story too far. It’s a big change.
The National Enquirer has long been a personal mission for David Pecker who has been choosing the cover every week. Like all AMI’s tabloids, it has few subscribers and minimal advertising. Most of the revenue comes from impulse copy purchases at the checkout. Pecker says a successful cover can add or subtract 15% from weekly sales.
He started out as an accountant and has imposed a stats-based discipline on the wild world of tabloids, building a database of covers, headlines and sales over the past 20 years (including those of competitors). Arguably, he has brought some science to the whimsical world of celebrity gossip. But, after two decades of personally vetting such stories and writing sensational cover lines, Pecker will now focus on his fitness and lifestyle brands including Men’s Fitness, Muscle & Fitness, Mr. Olympia Contest, Star, OK!, Us Weekly, In Touch, Radar Online, Men’s Journal, Closer, and Life & Style.
That’s a pretty solid portfolio at a time when specialist magazines are hot. But they are unlikely to get President Trump tweeting or inviting Pecker back to the White House. AMI without the National Enquirer doesn’t seem to justify the swagger of a CEO who has acted the old-fashioned media proprietor.
That’s why this may be a watershed as much for the National Enquirer as for David Pecker, the grafting New Yorker who started work at 16 to earn the house-keeping money after the death of his bricklayer father. He did book-keeping for local firms. After qualifying as an accountant, he worked for Price Waterhouse, where he studiously learned everything about every businesses he was auditing. He always worked hard on the detail. His entree into the media was via broadcaster CBS (then also a publisher of specialist magazines) first in the accounts department and, then, almost everywhere else.
Always looking for a break-out opportunity, he and entrepreneur Peter Diamandis pulled-off a $650m MBO for CBS Magazines in 1988. Scarcely a year later, they sold the slimmed-down company for $712m to Hachette, the French publisher of Paris Match. But the honeymoon didn’t last: Diamandis and most of his top team quit Hachette after a stormy meeting with French board members. Pecker saw the chance, stayed behind and became CEO of the US company which published magazines like Elle, Premiere, and George – a short-lived collaboration with the late John F. Kennedy Jr.
Insiders say that Pecker made his mark by continually blurring the lines between editorial and advertising – and also getting into trouble by doing favours for famous friends: “He seemed more interested in what magazines could do for him than what he could do for magazines. As far as we could tell, magazines were a vehicle for helping your friends and, consequently, yourself. David was always dealmaking and throwing people under the bus to get what he needed.”
Pecker was also said to treat John F. Kennedy Jr as a possession: “John was like a toy. He was like a shiny object that David could tout out to these advertisers, potential advisers and people he wanted to rub elbows with.” Some editors grew tired of the favours for friends, but many acknowledged the business smarts that enabled Pecker to make money even from struggling magazines. “David clearly had energy and a sort of fearlessness. He was willing to do things that other people wouldn’t. There was a humorous side to him because of his bravado and this kind of swagger he would have in the office. It was kind of amusing…but you knew that the man could retaliate if he wanted to.”
It is 22 years since Advertising Age noted that Hachette Filipacchi’s $15m acquisition of Travel Holiday from Reader’s Digest was a trademark deal for Pecker: “Pick up a money-losing third- or fourth-tier title at a low price, trim-back staff, plug it into a centralised sales operation and – presto! – turn a profit.”
Pecker’s competitors have described him as a “bottom fisher” because of his penchant for avoiding competitive bidding wars in order to concentrate on seemingly less desirable titles. Steve Florio, of Conde Nast, once said his rival “has mapped out a very aggressive growth plan. But his strategy has never been very clear. That may be because he is very smart or because he doesn’t have a strategy.” But Pecker saw himself as a “market contrarian” who took chances on unprofitable titles such as Home (bought in 1991) and Metropolitan Home (1992). “All the magazines we took over were losing money … and they all made money in their first full year under Hachette,” he claimed. As if to confirm his assertions and also those of his rivals, Pecker’s Travel Holiday acquisition saw him keeping only 14 of the 50 staffers on the magazine. That was how he did it.
Pecker’s cost-cutting and micro-management has often lost him senior talent but you can’t find people who think he cares: “He can’t give up any control. Everyone is fighting for their lives. That can become pretty sinister after a while. Everyone reports to David. If I want to buy pencils for my division, David has to approve it.” The only possible sign that Pecker cares what the world thinks of him might be his smart dress sense.
This month’s sale of National Enquirer neatly marks the 20th anniversary of Pecker’s appointment as CEO of AMI after the company’s purchase by Evercore Partner for a total of $770m including debt. In between (and before the Trump campaign shenanigans and the Bezos scandals), the company has survived a 2001 anthrax attack on its Florida office which killed one of its photographers and left others critically ill, and a $1bn bankruptcy in 2010.
But nobody is better with the money than this former 24/7 accountant. AMI, which had seen revenues fall from $321m in 2012 to $223m in 2016, is now faring much better than any print-dominated portfolio is entitled to expect, partly due to trademark low-cost acquisitions. In September last year (before he was forced to divest his beloved National Enquirer), Pecker was exuding optimism in an unusual financial disclosure which reflected the private company’s need to bolster investor and lender confidence:
- Built upon the successful acquisitions of the Bauer titles (Life & Style, In Touch, Closer, Teen Boss, J-14, Bake It Up, Girls World, Animal Tales, Coloring with Mommy, and Quiz Fest) coupled with the full year results of its Wenner Media Acquisitions (Us Weekly and Men’s Journal), AMI is poised to post its best results in several years. Revenues are estimated at $140m for the period ending 30 Sept 2018, up $7m (+5%) over prior year and adjusted EBITDA estimated at $48m – up $8m (+20%).
- For the year ending March 31, 2019 total revenue is forecast at $310m – up $32m (+12%), and EBITDA of $120m – up $24m (+25%).
The CEO also hyped AMI’s fledgling digital activities:
- Podcasts: It has launched more than a dozen weekly series podcasts across its celebrity brands, as well as the 12-part audio documentary podcast, “Fatal Voyage: The Mysterious Death of Natalie Wood,” which became the #2 program among all Apple podcasts worldwide with 4m+ downloads.
- TV/Video Broadcast: It is growing production collaborations with Investigation Discovery, producing 20 hours of programming as well as producing four non-scripted documentary shows for REELZ.
- Digital: AMI’s network of websites delivers some 68m monthly uniques
For all the weirdness, the AMI boss has a track record of cranking profits out of magazine brands, especially those discarded by others. Anybody but the tenacious David Pecker might have given some signs of hurting from the humiliation of being forced to sell the legendary tabloid to which he has given so much of himself. But the mask has not slipped and the company continues the uphill fight to reduce its troublesome borrowings and cost of capital. It’s tough, not least with this month’s disposal of 25% of current profits. One thing Pecker’s friends and enemies agree is that he never gives up. Let’s watch.
All media. Some 160 regional newspapers, magazines, printing and associated web sites are being sold in Australia by Nine Entertainment Co (NEC) which acquired Australian Community Media (ACM) as part of its A$4bn “merger” last year with Fairfax Media. It includes regional papers like Newcastle Herald, Canberra Times, The Examiner, Border Mail, The Courier and Illawarra Mercury, and farming publications The Land, Stock & Land, and Queensland Country Life. Final bids for ACM were made on Wednesday this week, in response to documents which show that the business can achieve A$8m cost savings in 2019 and a further A$7m in 2021. But it is not clear whether this is part of a reported plan also to reduce the regional newspapers’ headcount by 200 (about 10%).
In the first half of the 2019 financial year, ACM revenue was down 8% to $194.1m. Advertising revenue, at A$121.2m, was down 13%, and circulation was down 3% to $35.9m. EBITDA profit fell by 42% to $21m, expected to be A$44m for the full year. But some bidders are forecasting that, with cost savings and even allowing more revenue slippage, ACM could generate A$50m EBITDA by 2021.
After the sale, NEC will have three divisions: TV (Channel Nine and 9Now); Stan video streaming; and Newspapers (Sydney Morning Herald, The Age, and Australian Financial Review). NEC is also the majority shareholder in Domain property classifieds (which competes with News Corp’s REA Group) and in Macquarie Media, one of Australia’s largest radio networks.
Among the ACM bidders is former Domain CEO Antony Catalano (backed by the Thorney, an investment group owned by large-scale investor, philanthropist and sometime film producer Alex Waislitz). There are rival offers from private equity firms Allegro Funds, and Anchorage Capital Partners whose bid is reportedly led by the former SevenWest, ACP, and Bauer executive Nick Chan.
Catalano’s involvement has helped to focus attention on Domain, the A$1.8bn group which was separately IPOd by Fairfax in 2017. Bidders have been speculating that NEC might now seek to offload its 59% shareholding in Domain which has magazine links with many of the regional newspapers it is selling. Unsurprisingly, that speculation has swirled round Catalano who, having worked at Fairfax for 23 years (including as a property editor), became CEO and steered the de-merged company to its 2017 IPO, only to resign abruptly two months later. The scuttlebutt (in Fairfax’s own Australian Financial Review) linked the CEO’s departure with an alleged “boy’s club” culture of bullying in the company.
The speculation about NEC’s stake has helped to push up the Domain share price which, like the more international A$10bn REA Group, has been in the doldrums. News Corp owns 62% of REA and also 100% of Move Inc (which has 50m users in the US). The REA shareholding has a value equivalent to more than 50% of the US$7bn market cap of News Corp, owner of Wall Street Journal, The Times of London, The Australian The Sun, New York Post, Harper Collins, and Fox Sports. In Australia, where the Murdoch-controlled News Corp owns a regional newspaper network competing with ACM, its interests are broader than elsewhere and include Foxtel pay TV, Fox Sports and Sky News Australia. The country’s changed media ownership regulations (which allowed the NEC-Fairfax deal) might also permit News Corp acquisition of NEC’s primary competitor SevenWest.
But so much of the News Corp story is now about those growing digital real estate services which, in 2018, accounted for just 11% of revenues but 32% of its EBITDA. While news and information, subscription video, and books are almost equal contributors to the News Corp profit, digital real estate has superior margins, stronger growth rates – and better long-term prospects. So the whispers about NEC’s possible readiness to sell its Domain stake have inevitably led to speculation about a possible merger with Domain.
As it happens, News Corp has been talking to NEC in Sydney about a possible video streaming partnership between Foxtel and Stan (which was launched in 2015, now has 1.5m subscribers – 60% up in 12 months – and is forecasting a profit breakthrough this year). Stan is the main Aussie competition for Netflix and signed a content deal with Disney in December which, presumably, means that the Disney+ streaming service (launching in November) will not be competing in Australia.
So, that’s one fewer challenge for NEC which (with News Corp) can work out a 2019 TV-streaming deal and, perhaps, a digital property merger too. What price a REA-Domain-Move global combination?
For NEC, it all seems worlds away from 2006 when (along with ACP Magazines) it was acquired from the Packer family by CVC private equity for a disastrous A$5bn. The extravagant top-of-the-market deal was signed close to the 50th anniversary of Channel Nine’s launch of TV in Australia. But the celebrations didn’t last long and neither did the hapless executives who paid the price. Bauer bought the magazines. Having washed away CVC, NEC IPOd in 2013 and now has a market cap of A$3bn. It made 2018 (pre-Fairfax) revenue of A$1.3bn and EBITDA of A$257m. Classy drama in the AsiaPacific.
Magazines. Bauer Media Group, of Hamburg, is hoping to complete the purchase of French TV listings title TélécâbleSat Hebdo from Hommell Group. Bauer successfully markets other TV listings titles, notably TV14, among a global stable of 700 print and 400 online titles along with over 100 radio stations. Télécâble Sat was founded in 1990 and has a paid circulation of almost 500k.
B2C. Acquisitive Property Finder, of the UAE, a provider of real estate and property websites across the Middle East, has acquired online listing company Bahrain Property World. Property Finder was founded in 2007 and in 2018 attracted an injection of $120m from US private equity company General Atlantic, to fund the recent spate of acquisitions along with staff and technology. The company currently employs 450 people, of whom over 200 are based in Dubai. The group attracts over 6m monthly uniques and serves the investor market as well as individual property searches.
B2C. theSkimm, of the US, which started seven years ago as a morning newsletter for female millennials, has acquired the technology behind the texting platform Purple. Deal terms have not been disclosed. With this acquisition, the company is continuing its expansion out of the inbox. Purple is a text messaging platform that allows creators to charge subscribers directly for news and content updates via text messages.
Sound+Vision. French radio Groupe 1981, owner of radio brands Latina, Swigg and Vibration, has acquired OUI FM which has almost 480k daily listeners across 28FM frequencies, DAB, apps and online. OUI FM was founded in 1987 but had recently been loss making.
B2B. US-based WTWH Media has acquired EngineersGarage.com which was founded in 2010 and provides electrical engineering content to users in engineering employment and students, with a claimed community of 450k users worldwide and 500k visits per month. The acquisition boosts WTWH’s offer on its EE World site with enhanced tutorials. The company produces over 40 websites, 7 publications and numerous streaming and live events in the design, technical retail and hospitality sectors.
All Media. James Murdoch, who was CEO of 21st Century Fox before his father sold out to Disney for $71.3bn, reportedly plans to invest $1bn (50% of his personal proceeds) in establishing his independent media business, Lupa Systems. It will act as a holding company for his investments, with offices initially in New York and Mumbai. He’s in business on his own again two decades after he owned a hip-hop music label.
His first investment is expected to be a $5m stake in the new comic book publisher Artists, Writers and Artisans (AWA), which plans to migrate its characters to movies and games, under the ex Marvel Comics COO. AWA distinguishes itself from comic-book rivals like DC and Marvel by guaranteeing creators a percentage of the licensing deals it strikes. AWA’s stable of writers already includes Garth Ennis, who created the “Preacher” franchise, and J. Michael Straczynski (“Babylon 5”) who has also written stories for Marvel’s “Amazing Spider Man”. So it’s already a bit more than a startup.
In the week when James Murdoch has publicly donated to the campaign funds of Pete Buttigieg, the youngest Democratic hopeful for the 2020 US Presidential race (emphasising his political distance from his father and from Fox News), he apparently wants to develop a liberal leaning media portfolio, including news and lifestyle digitals, and also short-form content and adtech.
He has long been out of step with his older brother Lachlan and his father, politically, environmentally and technologically. He’s mad about cycling, karate and Bill Clinton. Don’t mention Donald Trump. Even Rupert Murdoch’s initial willingness to contemplate the sale of 21st Century Fox (at least partly because he felt unable to compete in the new era of Netflix, Apple and Amazon) was at odds with James who had, for three years, been trying to persuade his father to let him launch a streaming competitor. In the end, of course, the Disney price swung it.
The European image of the UK-born, US-educated James Murdoch is still clouded by his feeble excuses in News Corp’s phone hacking scandals during 2010-14. His heart wasn’t in either the company’s shaky defence or his father’s cherished newspapers that had caused all the trouble. But James had been a huge success as CEO then Chair of Sky, Europe’s best pay TV network, which has been bought by Comcast for $39bn. He led the transformation of a very good UK business into an unrivalled European leader in subscribers, content and technology. Rupert’s “tech-to-his-fingertips” younger son is now itching to create businesses with the smarts of both Silicon Valley and Hollywood. That’s why investors and inventors are already pitching.
B2B. Flight International magazine will celebrate its 110th anniversary this year – with a new publisher. It is believed that the UK-based weekly and its sister Airline Business are in the process of being sold by Reed Business Information (RBI) for a price of £6-8m. They are estimated to have revenues of £8-10m and operating profit of £1-2m. The so-called Flight Group is being separated from RBI’s Cirium aviation analytics and consulting business which is being retained.
It is not believed that the successful bidder for the group is one of Flight International’s main competitors, Jane’s Information Group (owned by IHS Markit) and Aviation Week (Informa). The venerable magazine is one of RBI’s last remaining links with its pioneering predecessors as publishers of specialist magazines, especially with transport brands like Commercial Motor, Autocar, Motorship, and Railway Gazette. Flight International itself was founded by Stanley Spooner who had already given the world “The Automotor Journal & Horseless Vehicle” late in the nineteenth century. His diversification into coverage of the first aircraft led to the breakthrough launch in 1909.
RBI’s impending sale of Flight International (what an archive) leaves Farmers Weekly and Estates Gazette as the last remnants of a print legacy but, presumably, the separation of magazines from data services will apply also to those brands some time soon. The vanishing magazines actually highlight RBI’s brilliant transformation as the cornerstone of the £2bn-revenue data and analytics powerhouse of the £30bn RELX group.
Events. Connect Travel, of Atlanta (a subsidiary of the UK-listed Tarsus exhibitions group), is acquiring four ‘summit’ events and a publishing brand from North American Journeys Inc (NAJ). Three summits (East, West and Orlando), Active America China, as well as the Inbound Report and TourOperatorLand. com will join the Connect Travel portfolio, which includes some similar travel industry events. Last year it acquired the eTourism Summit from NAJ.
Tarsus, which has a market cap of £380m, gives all the signs of a group that aims to diversify further beyond events into business information. Alone among the major exhibitions groups, it self-describes as “an integrated media company” and “an international business-to-business media group with interests in exhibitions, conferences, education, publishing and online media”. The 21-year-old exhibition organiser took its first major step into business information back in 2000 when it acquired the US-based Trade Show News Network (TSNN). That now claims to be the most widely-used events database with some 130k registered web users.
The question of whether exhibitions can benefit from integration with information services in any given sector is a familiar one. It is, presumably, being asked again at Informa, now the world’s largest exhibition organiser which is also a substantial business information provider. It feels like part of a discussion about just how exhibitions might pre-empt the digital disruption that has wrecked the business models of almost every other media channel.
For all the long-term global growth in exhibitions revenue, profit and venues, the future of trade shows may depend on extending their use of databases into business intelligence and procurement services. Even if cash-rich exhibitions did nothing more than develop exclusive data and information as value-added services for existing customers in their own markets, there may be good reasons to buy and build broader B2B media. Not ‘content marketing’ or trade news but valuable data and even workflow systems that customers might otherwise have to buy. Perhaps that is what Tarsus (and others) are thinking about.
Sound +Vision. Vox Media, of the US, has acquired California-based Epic Magazine and Epic Digital, which were founded in 2013 by journalists Josh Davis and Joshuah Bearman to publish “high profile true stories”.
The company is developing 40 film and TV projects. Their series Little America will be streamed by Apple and further projects include one scripted by the Coen brothers and another about disgraced auto entrepreneur John DeLorean, to be directed by George Clooney.
This is the first entertainment acquisition for Vox Media, which operates seven sites including Vox, The Verge, Eater and SB Nation, and has almost 90m monthly uniques in the US. But the deal is significant also because it will diversify the revenues of the largely advertising-funded network which, like many of its digital news peers, missed its advertising revenue targets for 2018. Vox had been targeting revenue of about $200m, compared with $160m in 2017. But it may have achieved almost no growth. Investors must be getting nervous about the company which has raised more than $300m in funds: its last investment, from NBCUniversal, valued Vox at about $1bn.
For this and other advertising-dependant digitals with strong audiences and high-rated content, it may be a question of adjusting expectations and costs (Vox Media has some 1,000 employees) – and diversifying revenues.
That re-adjustment is going to be an increasingly familiar theme in 2019 and the new realities will surely produce some headlining mergers of new media with old. In addition to this week’s resurgent talks between Viacom and CBS, and speculation (yes) of an Apple-Disney streaming combination, can we expect Huffington Post, Vice, and BuzzFeed to be acquired by traditional news companies?
All media. The UK authorities have approved the acquisition of outdoor advertising business Exterion Media by Global, the country’s largest radio group. Global will now launch its Outdoor division which includes the simultaneous purchases of Primesight and Outdoor Plus last September and Exterion in November. The radio group is now one of the European leaders in outdoor advertising which, presumably, will spark new innovation in digital out-of-home media.
Events. Centaur Media, of the UK, continues its disposals with an agreement to sell for £5m Employee Benefits and associated activity, to the German-owned DVV Media International. Revenues are derived primarily from events and online. DVV Media International is a UK subsidiary of DVV Media GmbH, of Hamburg, which specialises in transport/logistics and HR professional information. Its UK and international brands include Railway Gazette International, Commercial Motor, Motor Transport and Personnel Today which were formerly published by Reed Business Information. In 2018, Centaur’s HR business made £1.2m EBITDA on revenues of £3.2m, producing a multiple of just over 4x times earnings. Centaur has so far achieved disposal proceeds of £19.25m.
Magazines. The Claverley Group, one of the lesser-known but consistently most successful medium-sized publishers of regional newspapers in the UK, has acquired a majority shareholding in Kennedy Enterprises, of Bristol, publisher of 25 children’s magazines and comics with annual copy sales of 3.5m. Claverley is the long-term family-owned publisher of the Express & Star and Shropshire Star in the English West Midlands and the Jersey Evening Post and Guernsey Press in the UK Channel Islands off France. It has revenues of some £75m.
Sound +Vision. US Telco AT&T has sold its 9.5% stake in video streaming company Hulu back to Hulu for $1.43bn, ending the companies’ joint venture. The deal valued Hulu, which is majority-owned by Disney, at $15bn. Hulu was established in 2006 as a JV to allow broadcasters to address the threat of streaming services and now boasts 25m subscribers, attracted by titles including Emmy-winning The Handmaid’s Tale. Disney recently announced its own plans to deliver branded TV content to consumers via Disney+, and Hulu will be part of this strategy.
B2B. The UK’s Centaur Media Plc has confirmed it is selling its Business Travel Show and The Meetings Show, to Northstar Travel Media, of the US, as forecast last month in Flashes & Flames. The deal, for £9.25m in cash, is expected to complete on 30 April. In 2018, the exhibitions made adjusted EBITDA of £1.7m (before central overhead allocations), up from £1.6m in 2017, on revenues of £6.4m (2017: £6.1m).
The deal follows last week’s sale by Centaur of its financial services portfolio to Metropolis Group, for £5m.
It is now believed that Centaur’s £3m-revenue engineering portfolio (comprising The Engineer and the associated Subcon exhibition) may be acquired by the Mark Allen Group (MAG), for some £2-3m. This would mark a further build-up in MAG’s engineering portfolio. In 2014, it acquired the 40-year-old engineering specialist Findlay Media whose brands included Eureka!, New Electronics, and Machinery. Just this week, it also announced the acquisition from UKi of some internationally-focused magazines in automotive and aviation (see the following item in MediaDeals).
If it acquires the Centaur engineering portfolio, MAG will have strong information and events in three main B2B groupings: Health, Education and Social Care; Engineering; and Music. Although its digital resources may still be under-developed, the company has become a strong exhibition organiser as well as a solidly profitable publisher of B2B magazines. Its 2017-18 revenue/ EBITDA was £43m/£7.2m (2016-17: £37.1m/£5.5m). Current year revenue is expected to be more than £50m, with about 40% from exhibitions (all acquired and launched in the last seven years). The story keeps getting better.
B2B. Britain’s acquisitive Mark Allen Group (MAG) is buying 12 predominantly international, controlled circulation (free) magazines from the 28-year-old UKi Media & Events for a price believed to be £5-6m. The B2B magazines are mainly in the aviation and automotive sectors and include: Business Airport International, Aircraft Interiors International, Business Jet International and Vehicle Technology International. They will now be managed alongside the MAG brands Ground Handling International, Ramp Equipment News, and Air Logistics International.
The acquired portfolio is estimated to have total revenues of some £5m and operating profit of about £1.5m. Twenty people will be transferring with the brands. While this latest bolt-on deal cements MAG’s reputation as the UK’s most active acquirer of B2B assets (especially in print), it serves to highlight the almost-secret rise of UKi as one of the country’s leading exhibitions organisers which primarily operates automotive trade shows in North America, Europe and Asia.
The cash-rich company was founded in 1991 by Tony Robinson as AutoIntermediates Ltd, before becoming UK & International Press. By 1997, it had moved into exhibitions. In 2000, it became UKIP and, only recently, rebranded as UKi after several years of being confused with the fringe political party of the same name. In 2017, the company made operating profit of £6.83m on revenue of £33.5m (almost doubled in 10 years), more than 50% of which was earned in Continental Europe, notably from the range of automotive testing, interiors, components, engines and interiors exhibitions it operates annually in Stuttgart, Germany. These shows have been successfully cloned, variously in North America, China, India and South Korea.
UKi employs some 150 people – little changed in the 10 years that operating profits have increased by 500%. It has been listed in ‘fast track league tables’ and its own proud reference to awards made more than 10 years ago contrasts with exhibition web sites that seldom list even the company’s own name. Tony Robinson, the all-action (motorsports and flying) founder-owner almost never gives interviews. In the past, he has said:“We have consistently put people on the phones to research worldwide communities of specialist engineering and technical people. We don’t believe in buying-in data. We want to research it and verify it for ourselves.” The company’s success has been all about organising highly technical exhibitions with great attention to the detail of providing on-site testing facilities, demonstrations and highly-rated conferences.
This brilliant specialisation in technical events across automotive, traffic, marine, and aviation has been clear from the way that some advertisers and exhibitors are said to spend up to 90% of their entire global marketing budget on Tony Robinson’s magazines and exhibitions. In that sense, this disposal of 12 magazines to Mark Allen is no big deal since most are ancillaries to the company’s exhibitions – including Aircraft Interiors whose accompanying show was sold 10 years ago to Reed Exhibitions for an estimated £1.5m.
At this stage, Robinson will be hanging on to all his exhibitions and also to a bunch of magazines (principally in automotive). You wonder, therefore, whether this week’s divestment is motivated by the soaring valuations of exhibition specialists everywhere. Could the deal be a prelude to a sale of the whole business, perhaps to one of the private equity firms which have coveted UKi over the years and are now all over the exhibitions market? The company is only slightly smaller than the similarly UK-based but global Mack Brooks for which Reed Exhibitions paid some £200m in January. What’s next?
Magazines. The £90m-revenue Hearst UK may be planning a “material acquisition in a complementary business” over the next 12 to 18 months as part of a shift to becoming a “premium content and experience business”, according to chief operating officer Claire Blunt. Speaking at last week’s Digital Media Strategies conference in London, she said: “We’ve started to talk this year about seeing ourselves as a premium content and experience business – and so I guess one has to conclude that our complementary business would be in the space of enabling us to be that.”
Blunt’s words sent brokers scurrying even though 12-18 months seems a long way off and the parent company may first be pressing for more economies in its London-based magazine portfolio. Or not. Perhaps we can expect to see Hearst acquire a UK content marketing company or even an exhibitions organiser. But should CEO James Wildman go for Ollie Lloyd’s Great British Chefs ? The inspired, privately-owned eight-year-old online recipe, publishing, food research and insights business (with revenues of perhaps £2m) could be a perfect fit for Hearst’s Good Housekeeping whose influential GH Institute operates a London cookery school and carries out tests on behalf of food and kitchen equipment manufacturers. Way to go.
Magazines. American Media Inc (AMI), of New York, will offload its tabloid weeklies including the racy The National Enquirer after becoming involved in politically-charged legal investigations. The key shareholder in American Media, the hedge fund Chatham Asset Management, is said to be pushing for the sale of The National Enquirer (US and UK editions), The Globe, The Star, and the National Examiner. Particular unease lies around its reported pre- and post- election collaboration with President Trump.
The New York Times says: “The bond between the candidate and the tabloid… led American Media, in the campaign’s final months, to buy and bury the story of the alleged affair between Mr Trump and Ms McDougal (aka Stormy Daniels). To pull it off, American Media acquired the rights in exchange for $150k and a commitment to promote Ms McDougal’s career as a fitness specialist. More recently, the Enquirer (which once published pictures of Elvis Presley in his coffin) promoted lurid stories about Amazon’s Jeff Bezos, who accuses the title of blackmail.
Chatham fund managers have been alarmed by the proprietorial behaviour of chairman and CEO (and small shareholder) David Pecker at a time when it is struggling financially with $400m of borrowings. He now says that AMI is shifting its emphasis away from tabloids to glossies such as Us Weekly and Men’s Journal, its fitness magazines, and the adventure sports brands acquired from The Enthusiast Network in February. But, after months of wallowing in the pain and power of his tabloids, Pecker is a very recent convert to the superior values of his specialist portfolio. It may, therefore, not be too much of a surprise that he is now believed to be negotiating a non-standard divestment of his beloved tabloids: a sale which sounds more like a licensing deal and will involve service payments to AMI over the long-term.
While Pecker is the boss, perhaps nothing will ever be quite straightforward. So you can guess what might just come next for the man who has been at the helm of AMI for 20 years through boom, bankruptcy and bargain-basement deals. The US President would miss his favourite media boss.
News. Independent News & Media (INM), Ireland’s largest newspaper group which publishes daily and Sunday papers such as the Irish Independent and the Belfast Telegraph, along with regional titles, has notified the Dublin stock market of a takeover offer from an as yet unnamed source. The current market cap stands at €135m, with €82m of cash in the business. The group’s largest shareholder (with 29.9%) is Denis O’Brien, who previously ousted Tony O’Reilly, the now bankrupt former Heinz president, rugby international, and Irish business superstar. O’Brien bought his shareholding for a total cost of some €500m.
In its expansive heyday, INM was a significant media group in the UK, South Africa, Australia and New Zealand. O’Reilly, who was Ireland’s richest man, reportedly lost his fortune in a failed attempt to revive the glass and china manufacturer Waterford Wedgwood – and as a result of borrowings at INM and trading losses, including at The Independent in the UK. The company, which once owned about 200 media brands, was worth a peak €1bn before the 2008 global banking crisis. Potential acquirers for INM may include European groups Axel Springer, Schibsted, Sanoma or a consortium of Dublin based investors. Apparent UK interest from News Corp and the Daily Mail Group is said to have ended at an early stage.
B2C. Boston-based private equity firm Great Hill Partners is acquiring Gizmodo Media Group (owner of Jezebel, Deadspin and The Onion) from Univision Communications. The price is believed to be under $50m – about a third of the $135m Univision paid just three years ago when it acquired most of the Gawker Media sites via a bankruptcy auction in 2016, after they had posted a sex tape of the former wrestler Terry Bollea (aka Hulk Hogan). Hogan had successfully sued Gawker, secretly backed by the billionaire Facebook director Peter Thiel, who had held a longtime grudge against the owner-founder, British-born digital entrepreneur Nick Denton.
Univision is now walking back from the short-lived English language media strategy it had been pursuing when it acquired Gizmodo and The Onion in 2016-7. It’s going back to its Spanish speaking heartland. The deal also include sites like Lifehacker and Jalopnik which will be operated by a new company G/O Media to be run by James Spanfeller, ex-CEO of Forbes.com, PC Magazine and RealClearPolitics, who also founded the Daily Meal.
G/O Media claims to have 100m monthly uniques, primarily in the 10-34 age group. Great Hill Partners has previously invested in a number of digital media companies, including Ziff Davis, career website Recruiting.com and obituary search tool Legacy.com.
B2C. DC Thomson, the Scotland-based, family-owned media group, has acquired PSP Media, the organiser of the Scottish Golf Show and Girls’ Day Out, in a deal which includes all the group’s print, events and digital assets. PSP, founded in 1995 with Bunkered magazine, will continue to be based in Glasgow. DC Thomson had acquired No.1 magazine from PSP in 2015 and now aims to find further synergies and growth opportunities including through B2B and B2C events and digital platforms. In September, it acquired the UK specialist magazine publisher Aceville in a deal estimated at £20m. Last month, it completed the acquisition of Kingdom FM and Original 106 to consolidate its position within Scottish radio.
In 2017-8, the 113-year-old DC Thomson made £71m of pre-tax profit on £191m of revenue from a portfolio spanning historic Scottish newspapers (in Dundee and Aberdeen), quaint old-fashioned women’s magazines (The People’s Friend and My Weekly), online genealogy (FindmyPast), Puzzler publications, and the free weekly Stylist which was acquired for £14m in 2016. Some 20% of DC Thomson revenues are from outside the UK (mainly the US), and 19% of all revenue is digital.
B2B. PEI Media Group, the UK-based international publisher of B2B information for private equity, has acquired US-based Argosy Group LLC from Simplify Compliance. Argosy, established in 1994, also provides information to private equity and VC markets across information products, online, events and databases. Terms of the transaction were not disclosed.
B2C. Property Finder, the UAE-based real estate website has agreed to acquire its competitor JRD Group which owns Justproperty.com and SaaS offer Propspace, as part of its growth strategy across the region. JRD was founded in 2008, receives 400,000 monthly uniques and its founders, Alex Nicholas and Siddharth Singh, will stay with the company and become shareholders in Property Finder. Property Finder has raised $120m from equity firm General Atlantic, giving a valuation of almost $500m. Last week, the company also raised its stake in Zingat, an equivalent property website in Turkey.
Books. US children’s publisher Jump! has acquired curriculum publisher Bearport Publishing. The brand will continue to publish early-reader non-fiction titles to add to its backlist of over 1,000 titles. Founder of Jump! Gabe Kaufman began his career at Bearport before establishing the rapidly growing imprint Jump! in 2012.
B2B information. Metropolis Group, of the UK, has acquired the financial information division of Centaur Media for £5m in cash. The deal involves the advertising-led Money Marketing and Mortgage Strategy, and the subscriptions-based Platforum, Taxbriefs and Headline Money. Together, they made 2018 operating profit of £1.2m on revenues of £8.2m. The revenue (some one-third of which is accounted for by subscriptions) has declined by 15% over the past two years, while profit has increased by 50%. But the acquisition price is less than the £8m Centaur paid 8-9 years ago only for the subscription businesses Platforum and TaxBriefs.
The divestment is the first of a series planned by Centaur (including its exhibitions and legal publishing) which will leave the company focused solely on the marketing services sector where its key brands include Marketing Week, Festival of Marketing, Oystercatchers, and eConsultancy. The inevitable problems in conducting 4-5 auctions concurrently include the implied need to sell each group of assets at the best price on offer, almost whatever it is. Some deals may inevitably defy the forecasts and disappoint shareholders.
This deal serves to highlight the growth of the 25-year-old Metropolis Group which has acquired a succession of (mainly B2B) magazine-centric businesses in the UK for prices that are seldom outside the range of 4-5 x EBITDA. The company now owns some 35 B2B brands, almost one-third of which (including Local Government Chronicle, Construction News, and Nursing Times) were acquired from Ascential for £23.5m in 2017 @ 3.4 x EBITDA.
The tight pricing (and clear website guidelines for those wishing to sell businesses to Metropolis) seem appropriate for a company majority owned by a fund manager, ex Bain and Schroder’s executive Jonathan Mills, and it’s working.The company’s last reported revenue was £43.6m with EBITDA of £7.7m. The former Ascential brands produced £4.6m of that profit – just for their first seven months under Metropolis ownership, which may make the purchase price a full-year multiple of less than 3 x EBITDA. Another steal.
Metropolis self-describes as “a fast growing group that specialises in business & consumer media and discount & loyalty programmes (Smartsave).” It employs some 500 people and has offices in the UK, Ireland and the US. CEO Robert Marr is building a strong media company. When he was appointed in 2012, 80% of the revenue was print advertising, today it has flipped to just 20%. A further 20% and 40% come respectively from digital and events, its strongest growth areas. It is not the first company to specialise in spotting the scarcely-hidden potential of acquiring unwanted assets from impatient larger companies with better things to do. Also in the UK, Mark Allen‘s opportunism has been masterly. While print is undeniably in systemic decline, many B2B magazine brands continue to be great platforms from which to launch digital media and events.
Presumably, Metropolis Group itself will eventually be sold-off or IPOd in order to maximise the return for its investor-owners. But, then, a bunch of “unwanted” B2B magazines are providing a pretty good flow of profits for their hedge funds so there may be many more low-cost deals yet.
B2B information. The disclosure this week that former Time Inc chairman and CEO Joe Ripp has invested alongside Ridgemont Equity Partners in Backstage (the US media brand for actors) has reinforced the speculation that the company is preparing to get serious about international expansion. The former Time Inc boss has joined the board of Backstage and everybody is talking about a pipeline of deals.
Ridgemont has described Backstage as “the global platform that enables productions, brands, marketing agencies, and businesses to discover and work with highly skilled creative talent” and says it receives over 4,000 roles each week covering every type of project, casting all across the US, UK, Canada, and Australia.” But it’s really a US business which started out in 1960 as a weekly newspaper for actors.
It now self-describes as “the biggest online casting platform in the US, providing actors and performers with the tools they need to build a profile, land auditions and receive career advice. Not only that, Backstage is also the place for casters to find talent and post jobs.” Its presence in the vibrant UK market is overshadowed by the family-owned casting and recruitment businesses operated by Spotlight and The Stage. But there are New York whispers that – among many other targets – Ridgemont wants Backstage to acquire and/or invest in Media Business Insight (MBI), the private equity-owned UK publisher of two principal magazine-centric brands, Broadcast and Screen International.
MBI was a c£12m MBO from B2B group Ascential Plc in 2015 and its private equity backers Mobeus are now planning their exit from a company which has not been a spectacular investment. In 2017, MBI had revenue of £12.3m and EBITDA of £1.6m which represented a 25% increase in revenue and 30% increase in profit across three years. There have been some disposals which probably improve the scores but it’s a modest private equity performance. MBI has growing operations in paid-for digital media and events – and 40% of its revenues come from outside the UK. Other attractions for would-be buyers may include 35% of revenues from subscriptions and 15% from events including the annual Media Production Show attended by more than 5,000 visitors and 150 exhibitors.
MBI is a well-managed company with some long-established brands, solid revenues, and deep expertise. It has real international presence in the film business and the potential to do so much more. It’s just too small, which is why it has caught the eye of Backstage’s owners as a buy-and-build base for their international ambitions. But they’re not the only ones. The acquisitive Penske Media (publisher of Variety, Deadline and much else) may also be interested in acquiring the London-based company. They’re all on the list.
Magazines. The UK specialist magazine publisher, the Enthuse Group, has bought a 51% stake in AA Media Ltd, the hospitality, publishing and merchandising unit of the AA, the UK listed car breakdown service, route finder, and insurance provider formerly known as the Automobile Association. The deal is reported to value AA Media (£17.5m revenue and £2.1m EBITDA in 2018) at about £10m.
Enthuse Group (formerly known as My Time Media) was co-founded in 2006 by majority shareholder and ex Daily Mail Group executive Owen Davies via a buyout of hobby magazines from Highbury House Communications which collapsed that year. It serves special interest groups with some 30 print, digital and event brands including Hi-Fi News, The Woodworker, Model Engineer, and Stamp magazine in the UK, and Shutterbug and Sound & Vision in the US.
The company has been growing rapidly, principally through the acquisition of seemingly unloved magazine brands from larger publishing companies including Time Inc and Future Plc. It acquired three US brands last year from The Enthusiast Network.In 2018, Enthuse Group reported revenue up 75% to £10.5m and EBITDA of £1.3m. It claims 250k paying magazine subscribers, 1.7m monthly uniques, and 1m YouTube monthly views. More than 30% of revenues are from outside the UK. The AA Media investment clearly represents a major step-up for the quietly ambitious UK company.
Books etc. The newly-established Welbeck Publishing Group, founded in the UK by Mark Smith (ex Bonnier) and Marcus Leaver (ex Quarto Group), has acquired the 27-year-old Carlton Books, publisher of illustrated books for adults and children, specialising in topics like entertainment, history, sport, arts, lifestyle, and puzzles. Its imprints include: Goodman, André Deutsch, Prion, and Carlton Kids. Carlton’s revenue fell 26% in 2017 to £10.8m with operating profit down 81% to under £300k, largely as a result of the end of a colouring book boom. Welbeck aims to grow through further acquisitions.
Interestingly, the Welbeck investors include the privately-owned Think Publishing. The under-stated London-based custom media company, which specialises in media mainly for B2B membership organisations, has revenue of some £15m, 80 staff and more than 42 clients served by offices in London and Glasgow. CEO and co-founder Ian McAuliffe says the company (co-owned with his wife Tilly) does “what it says on the tin. We are a membership communications agency. We specialise in publishing and all the things that are associated with it… sponsorship, events, exhibitions, digital, and email for membership clients. We do have a few traditional customer publishing clients, like First Great Western, the Preferred Hotels Group and others, but we specialise in membership and that’s one of our key differences.” In an era when most corporates are chasing members of one sort and another, Think is in a sweet spot.
Another distinctive feature of the 20-year-old company’s approach may be the consumer-magazine quality of its publications, even for some quite err narrow business and professional organisations. Think’s clients love it. In 2017, the company acquired the financially fragile Wanderlust magazine (which had losses of £336k that year). The 25-year-old publication offers scope for all kinds of diversification once the economics are sorted. It all seems to underline McAuliffe’s ambition to diversify using his company’s skills and profitability. We might expect further deals including self-owned B2B magazines, digital media and events – to balance Think’s portfolio of client contracts. Perhaps they will also take their membership media expertise beyond the UK by establishing low-cost joint ventures and partnerships in international markets.
The question might be whether the much-awarded Think Publishing starts to fulfil its wider ambitions before or after a private equity or media investor comes to call.
B2C digital. Big things are happening in the UK online car sales market. CarGurus, the US leader in used car sales, acquired PistonHeads from Haymarket Media and is working hard to catch runaway leader AutoTrader.
Haymarket CEO Kevin Costello told delegates at this week’s Digital Media Strategies conference in London that his What Car? brand was developing a strategy to chase down CarWow, the UK market leader for new car sales which has revenue of some £18m from sales of 60,000 cars (£300 per car sold by dealers). Whether What Car? (a major magazine-digital information brand in the UK) really can catch the turbo-charged CarWow is open to question, although the smart money may be on Haymarket striking some kind of partnership/joint venture with an existing operator. The potential shifts in car use, ownership, technology, and funding can be scary for established companies.
Meanwhile, Alex Chesterman, the digital Brit who founded Lovefilm (sold to Amazon for £200m in 2011) and the Zoopla property sales platform (sold last year for £2bn), has fund-raised some £30m from backers including the Daily Mail Group (DMGT). It’s all for this Summer’s launch of Cazoo, a site which will let customers buy and rent used cars. It will sell refurbished cars online, deliver them within 48 hours and offer a 7-day free return policy.
Chesterman, along with some of his latest backers, was an early investor in CarWow. He is now planning to buy thousands of cars and a distribution centre. The obvious risk of such operations is in the funding required to hold the stock (something CarWow never has to do, as a sort of lead-gen model).
DMGT was the largest shareholder in Zoopla as well as in UK comparison site Uswitch, and property site Primelocation. The news publisher had a successful track record of such venture funding (starting with Euromoney) decades before it became, well, fashionable.
Cazoo might be expected to test the resilience of the Buy-a-Car online sales operated by Dennis Publishing – and AutoTrader itself. Meanwhile, the increasingly powerful DriveTribe (“part social media, part publishing”), launched by former Top Gear TV star Jeremy Clarkson, is believed to have secured fresh funding after agreeing to slash its lavish budgets. Just in time. Some car brands really are now spending hundreds of thousands of pounds on DriveTribe content marketing because they love its technology, user-immersion and global reach. It might, after all, become the template for all kinds of special interest global networks. Phew.
B2B information. Acuris, the BC Partners and GIC-backed provider of financial data, intelligence and research on corporate financial performance and deal activity (formerly known as MergerMarket) has acquired (for an undisclosed price), the Hong Kong-based investigative research firm Blackpeak for its Compliance division. Acuris publishes MergerMarket and Debtwire and is itself the subject of acquisition interest from the likes of Fitch, Moody’s and S&P Global, with BC partners seeking an exit valuation of around £1bn, some three times the price BC paid Pearson/FT for the business six years ago – and 10 x what Pearson paid seven years before that. First round bids are due today (5 April) and, while the Wall Street Journal (News Corp) and Fitch (Hearst) have been publicly linked with Acuris, many predict that the smart global business – which faces increasing competition from Pitchbook (owned by Morningstar) and Bloomberg – will be bought by private equity.
Books. US academic book publisher Rowman & Littlefield has acquired the publishing imprints of Finney Company, a publisher, distributor, and manufacturer of educational materials targeting career and technical training and outdoor interests. The deal includes almost 400 non-fiction titles produced by 12 Finney imprints. The acquisition follows others made by Rowman & Littlefield in small niche areas it feels have been overlooked by larger publishing houses. The company, which is one of the largest independent book publishers in North America, was founded in 2013 – in London, UK. It publishes approximately 2,000 new books annually together with electronic editions.
Rowman & Littlefield
Books. Penguin Random House (PRH), the world’s largest trade book publisher, is expanding its share of leading the children’s market with its purchase of Little Tiger Group, the London-based publisher and packager of children’s books. As part of the transaction, PRH has also acquired UK-based packager Liontree Publishing which will be brought under Little Tiger Group. Monty Bhatia, the co-founder and CEO of Little Tiger Group will continue to run the business which was founded in 1987 and publishes over 200 titles each year. No terms were disclosed.
B2B information. Bonhill Plc, the AIM London listed B2B media business and owner of Investment News, is to acquire Last Word Media, paying an initial consideration of £8m (£6m cash and £2m shares). An earn-out may add a further £2m over the next two years. Last Word is an international B2B media business supplying information to the global asset management industry. It was launched in the UK in 2005 and currently has 71 staff in London 11 in Asia. Almost 60% of revenues are derived from events, the remainder from business information, data and content. Total revenue for 2018 was £10.2m with EBITDA at £1.1m. Bonhill focuses on three sectors: technology, diversity and financial services. Financial titles include consumer brands What Investment and Growth Company Investor in the UK, and Investment News in the US.
B2B information. vLex, the legal information publisher based in Barcelona and backed by Caixa Capital Risk, has announced the acquisition of Justis Publishing Ltd., a provider of online legal publishing, which will give vLex a stronger position in the UK legal market, allowing the company to build on the legal database content of Justis with vLex’s AI technology. Terms of the deal were not disclosed.
Magazines. Bustle Digital Group, founded in 2013 by Bryan Goldberg and targeted at modern women claiming a combined readership of 80m, has bought The Outline, a tech and culture website launched two years ago by Josh Topolsky, attracted by the company’s proprietary custom publishing platform. The Outline was rumoured to be valued at $21m in early 2018 following fund raising series but ad revenues failed to materialise in scale (an experience shared by its digital peers Vice Media, BuzzFeed and Mashable) resulting in staff cuts. All remaining 11 staff will transfer to Bustle. Topolsky still intends to launch a tech site The Input later in 2019.
Magazines. Private equity firm TPG Capital is entering the bidding for the purchase of Meredith Corp’s Sports Illustrated along with reported interest from News Corp, who are allegedly more interested in its digital property FanSided, and Ulysses Bridgeman a former NBA player. Meredith was reported to be looking for a price of $150m and a completion date in June for the magazine it acquired as part of its takeover of Time Inc.
News. After acquiring a large stake in Europe-based The Next Web, Nikkei, Japanese owner of the Financial Times, is thought to be buying another digital start-up, this time serving the Asia market: Singapore-based Deal Street Asia (DSA), which reports on finance, business verticals and start-ups. The company also operates the event Asia-PE-VC, this year in September. DSA was founded in 2014 and operates a subscription model for its premium content. Terms of the deal remain unclear. Nikkei are thought to be pursuing further digital acquisitions around the globe and may bundle their offer into a new subscription service. The FT is known to have offered to invest in and/or acquire The Information, Jessica Lessin’s high-rated (and solidly profitable) Silicon Valley information service.
Exhibitions. Exhibition organiser Easyfairs has strengthened its trade show portfolio by acquiring two mechanical engineering events from Clarion, FMB, and FMB-Sud, in Germany, which together claimed 750 exhibitors and 7,000 attendees. The privately-owned Easyfairs is itself the subject of speculation about a possible change of ownership, now expected later in 2019. But the privately-owned company is showing that it will keep adding to its portfolio. The company employs 750 staff and has a turnover of €157m. The terms of the deal were not disclosed.
Magazines. We all know it. This can be a golden time for specialist media produced by enthusiasts for enthusiasts. Niche publishers might still lose advertising to Facebook and Google, and copy sales to the free web. But these passionate, focused audiences can become buyers of more than magazines, books and digital information: e-commerce can provide new growth. However, two corporate announcements this month highlighted the divergent fortunes of specialist publishers pursuing e-commerce ambitions in the UK and US.
The UK-based Future Plc announced the acquisition of US digital publisher Mobile Nations. It was the magazine-centric company’s fifth acquisition in 15 months with total spending of some $300m. The latest US deal came as it reported 2018 EBITDA up by 88% and profit margin up from 13% to 17%. E-commerce accounted for $23.1m of revenues and had more than doubled in 2018. Shareholders of the company, founded 34 years ago by TED boss Chris Anderson, love its strategy: the share price has more than trebled in the past 12 months. It is becoming a multi-platform specpub by building proprietary tech, shifting its centre of gravity with targeted acquisitions, and recruiting a senior team of (largely) non-magazine people.
Across the Atlantic, the $90m-revenue F+W Media has a different story. It has been a prominent specialist magazine and book publisher since the 1913 launch of Farm Quarterly and Writer’s Digest (hence F+W). Its “passion” categories now include fine art, crafts, writing, collectibles, genealogy, gardening, woodworking, and astronomy. The company, that must once have been coveted by Future (and vice versa), has grown though a series of acquisitions, including book publishers David & Charles and Krause, Aspire Media, and New Track. In addition to magazines and books, it operates digital services, podcasts, online education, exhibitions – and e-commerce. Its major brands include: Coins magazine, Military Vehicles, Interweave, Quilting Company, Artists Network, Writer’s Digest, Antique Trader, Gun Digest and Popular Woodworking. But it all came crashing down this month as F+W filed for bankruptcy with net debt of at least $105m and a mere $2.5m in available cash. All its assets are now up for sale.
It is less than three years since a debt-for-equity swap cleaned out the company’s former private equity owners and provided what was supposed to be a lifesaving $15m. But it was too little too late and this month’s crash brought to an end the intervening years of asset sales, outsourcing, and 40% redundancies. It had been scrambling to stay afloat. Early explanations were that the company had struggled to compete against cheap (or free) online content but the real problem was a poorly executed e-commerce strategy. As the company began online sales of art, craft and writing supplies, it invested heavily in merchandise, the warehousing to store it, and the tech to manage the whole process. The company now admits: “Unfortunately, these additional obligations came at tremendous cost, both in monetary loss and the deterioration of customer relationships”. The damage was clear: F+W lost no fewer than 36% of its subscribers during 2015-18, while advertising revenue fell by 30%. It now says that the seemingly-expensive technology it purchased for e-commerce operations was either unnecessary or flawed, resulting in customer service issues that caused significant reputation damage. Far from saving the company, e-commerce was the only revenue stream that consistently failed to produce profits: last year, for example, $3m in craft revenues had a $6m cost of sales.
It’s a long way from 2014 (the year, incidentally, when Future’s CEO Zillah Byng-Thorne was appointed). That was when CEO David Nussbaum (now CEO of the high-flying America’s Test Kitchen TV shows) announced that F+W was “strategically moving away from our traditional roots in the media business to focus on its fastest-growing businesses, digital and e-commerce.” F+W was full of optimism and was said to have grown its e-commerce business from one “store” with $6m revenue to 31 “stores” with almost $60m. Nussbaum credited the apparent success to “hiring the right people.” But it is now clear that F+W under-estimated the cost and complexity of its e-commerce.
As a result, many of its larger creditors are those same technologists including Oracle (owed $953k) and Adobe ($695k), and thousands of others including printers and fulfilment companies. F+W never had the expertise or technology to match its ambitions to become a full-service online retailer and this, ultimately, wrecked its relationships with pre-existing print customers. Greg Osberg, the former president of CNET and Newsweek, who became CEO of F+W in 2017, told the bankruptcy court that F+W got almost everything wrong: “The company’s decision to focus on e-commerce and de-emphasise print and digital publishing accelerated the decline of the company’s publishing business, and the resources spent on technology hurt the company’s viability because the technology was flawed and customers often had issues with the websites.”
There’s nothing like bankruptcy for exposing the flaws in a strategy that once looked credible. We are all wiser with hindsight. But the F+W collapse does seem to expose some obvious strategic mistakes. The first point to make is that there is no single model for “e-commerce”. The catch-all term covers a range of online sales activity: from “affiliate” marketing of products on behalf of others (which reader-users click-through to buy from an established retailer), to full-service retailing in which the media company itself buys the stock and takes responsibility for delivery – and all the risk. In between, media can make bespoke arrangements with retailers including sales guarantees, volume incentives, and also provision for “lifetime” commission payments from future purchases by their reader-users.
F+W believed it had the skills and resources to be a full-service retailer and, in the process, managed to damage its pre-existing reader relationships. Media companies have loyal reader-users who depend on them for information, entertainment and a sense of community. But extending that relationship into retailing must include a cool calculation about whether such sales may compromise a media brand’s independence and authority. That may help a media brand to focus on specific products and services, as well as defining the interaction (or not) with editorial content or the brand itself. But, even after satisfying that test, publishers must recognise that operating as a full-service online retailer at scale requires some “non media” resources in order to meet the expectations of customers accustomed to Amazon or ASOS.
That’s where we come back to Future Plc. The UK company itself has had more than its fair share of near-death experiences since it IPOd in 1999 (the year, incidentally, when F+W’s Rosenthal family fatefully sold their third-generation company to investors). But it is now building an increasingly global business where reader-users across tech and hobby markets are fuelling strong growth in e-commerce. It is difficult to know where to begin in contrasting Future’s strategies, proprietary tech and marketing skills with the F+W debacle. But we can start by saying that, for all its profitable growth in affiliate e-commerce, Future doesn’t have warehouses full of things to sell to its reader-users or a distribution chain to deliver them. It now generates almost 20% of revenues from e-commerce commission of some 4-5% on purchases by readers (up to 50% through Amazon). But Future knows it is not a retailer. Go figure.
Informa, the £9bn UK-based B2B events, information and research company which is the world’s largest exhibitions group, has launched “a founder-friendly venture capital fund that makes early stage investments in the Knowledge & Information economy”. The company will offer capital, access to markets, mentorship and expertise to entrepreneurs and founding teams, focusing on start-ups whose products and services are based on content, intelligence and connections, and “where founders have clear vision of how disruption and innovation will challenge and shape these markets”. The fund is headed by the New York-based Richard Stanton, Informa’s Chief Digital and Innovation Officer, who says:”Our investment focus is on start-ups that operate in the global market for information services.” The fund will make Seed and Series A investments.
Magazines. The Sydney-based Rainmaker Group (which provides market intelligence, industry research, media, events and consulting for financial companies) has acquired the Sydney-based Money magazine from Bauer Media Australia. Money will become Rainmaker’s first consumer magazine, alongside the B2B flagship Financial Standard. Money was established in 1999, in conjunction with the eponymous Channel Nine TV programme, and claims to be Australia’s most-widely read personal finance magazine. It is assumed that Rainmaker will seek to grow its B2B and B2C financial media.
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